Question

4. Suppose that your production function is q(L) = 10L". a. In a table, calculate the output, average product and marginal product for L = 1,2,3,..., 9. b. Suppose fixed costs are $100 and the price of labor is $20. In a table, calculate the average cost and marginal cost for L = 1, 2, 3, ..., 9. c. If you could sell your output for $9, how many workers would you hire? 5. You need to expand production, either in the US or in Mexico. Currently, your average American workers produce 100 units per hour and Mexican workers produce only 16 units per hour. But your American workers will cost you $20 per hour and your Mexican workers cost you $3 per hour. a. Graph as much this information as possible as isocost and isoquant information. b. Where should you expand production? c. Looking ahead into the near future, you forecast that your American workers will cost you $25 per hour, but demand for labor in Mexico will drive up costs per worker there to $5 per hour. How does this alter the isocost and isoquant graph? d. Given these forecasts, where should you expand production?

Answer 1

*We are supposed to do only one question. Please post unrelated question separately.

4)

a)
L	q(L)	Average Product (APL)	Marginal Product (MPL)
1	10.00	10.00	10.00
2	14.14	7.07	4.14
3	17.32	5.77	3.18
4	20.00	5.00	2.68
5	22.36	4.47	2.36
6	24.49	4.08	2.13
7	26.46	3.78	1.96
8	28.28	3.54	1.83
9	30.00	3.33	1.72
b)
L	q(L)	Total Cost (TC)	Average Cost     (AC)	Marginal Cost (MC)
1	10.00	120	12.00	20.00
2	14.14	140	9.90	4.83
3	17.32	160	9.24	6.29
4	20.00	180	9.00	7.46
5	22.36	200	8.94	8.47
6	24.49	220	8.98	9.37
7	26.46	240	9.07	10.19
8	28.28	260	9.19	10.95
9	30.00	280	9.33	11.66
c)
The firm will produce till Price is greater than or equal to Marginal Cost.
Therefore, the firm will hire 5 units of labor.