ECO2003F - Diminishing Marginal Assignment

Assignment Task

Questions

1. a) Suppose each extra worker produces one unit of output more than the previous worker, up to eight workers. Between 8 and 12 workers, all workers produce the same number of goods. From the 13th worker, all additional workers produce one less than the previous worker. Sketch the total product of labour, the average product of labour, and the marginal product of labour for this firm.

b) Does this production function show any signs of specialization or diminishing marginal returns to labour? 

2. By studying, Keratiloe can improve her marks for an upcoming exam. Keratiloe’s grade for the exam is denoted by GGKK = 3.5AA0.36RR.64, where A represents marginal analysis questions, and R represents demand and supply questions. Her roommate Cath is also writing this exam, and her grade is represented by GGCC = 2.5AA0. 25 RRo.75.

a) Who is the smarter student? Explain your answer

b) Derive two expressions and use them to explain her return to study time across the two question types.

c) She wants to focus all her time on one question type. Would this be beneficial to her?

d) Graph two effort Isoquants for Keratiloe using grades of 60% and 75%. Plot R on the vertical axis and A on the horizontal axis. On both effort isoquants, label at least one point.

e) Derive an expression for Keratiloe’s marginal rate of substitution.

f) Using Keratiloe’s 60?fort isoquant drawn above, calculate and interpret Keratiloe’s marginal rate of substitution when she is spending 10 hours studying marginal analysis questions.

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