Question

1. Think of a small machine shop, with two skilled workers running the place, that produces small parts for industrial use. These workers, long-time partners, would have a hard time hiring an extra person to work alongside them (it’d be a question of finding exactly the right, skilled person with the right disposition). But short term, it’s easy for them to add capacity/output by renting new pieces of equipment, i.e. capital. So, for them, labor is fixed in the short term while capital is the variable cost.

(a) Starting from the data below, work out the marginal product of capital that corresponds to each level of possible firm output, where, analogously to MPL, MPK = DQ/DK. (The table below can be copied and pasted straight into Excel if you wish, for the sake of doing the calculations—but in your written answer show how you did the calculation. Answers are best organized if they’re reported in the form of a table like we did in class.)

(b) Graph the MPK against Q, as we did for MPL against Q. Is there “DMPK”?

K	L	Q
0	2	0
1	2	100
2	2	225
3	2	320
4	2	385
5	2	415
6	2	420

Answer 1