Question: (a) graph production as a function of capital given some fixed level of labor. (That is, instead of graphing F(K, L), graph F(K, L).)

(a) graph production as a function of capital given some fixed level of labor. (That is, instead of graphing F(K, L), graph F(K, L).) (b) Judging from your graph in part (a), draw the corresponding graph for marginal productivity of capital, MP(K). (Just as we did in class for F(K, L)). Give an intuitive explanation as to why this is an increasing or decreasing function. (c) Give an intuitive argument as to why a firm would find it optimal to hire that amount of capital satisfying where r is the real rental rate, r = class for MP(L) =w, explain why decisions for the firm). MP(K)= =r B. (That is, using the same argument's used in MP(K) > r and MP(K) 10 8 6 Capital (K) 4 2 0123 4 Output (Y) 10 5 6 7 8 9 10 Labor (L) 8 Production Function: 6 Y = F(K, L) 4 2

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