Question: A firm has the following short-run production function: Q = 50 L + 6L2 - 0.5L3 where Q = Quantity of output per week L

A firm has the following short-run production function:
Q = 50 L + 6L2 - 0.5L3
where Q = Quantity of output per week
L = Labor (number of workers)
a. When does the law of diminishing returns take effect?
b. Calculate the range of values for labor over which Stages I, II, and III occur.
c. Assume each worker is paid $10 per hour and works a 40-hour week. How many workers should the firm hire if the price of the output is $10? Suppose the price of the output falls to $7.50. What do you think would be the short-run impact on the firm's production? The long-run impact?

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Based on the equation Q 50L 6L 2 5L 3 we can generate the following short run production schedule Va... View full answer

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