You have gathered real-world data for Swedish firms and have derived the following production function for...

 

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You have gathered real-world data for Swedish firms and have derived the following production function for a typical Swedish firm: 25.075.012.3 KLq=where labor (L) is measured in years of work (2 000 hours of work per year), K is the number of units of capital and q is the amount of output that can be sold for 100 Swedish kronor (kr). Setting capital, K, at 85 units, (b) find the number of workers per year needed to produce q units of output, as a function solely of output. (c) find the variable cost if the wage is 20kr. (The expression must show how the variable cost varies with output). (d) find the average variable cost as a function of output. (e) find the marginal cost as a function of output. (f) Does the firm exhibit constant, increasing or decreasing returns to scale? What does it mean? You have gathered real-world data for Swedish firms and have derived the following production function for a typical Swedish firm: 25.075.012.3 KLq=where labor (L) is measured in years of work (2 000 hours of work per year), K is the number of units of capital and q is the amount of output that can be sold for 100 Swedish kronor (kr). Setting capital, K, at 85 units, (b) find the number of workers per year needed to produce q units of output, as a function solely of output. (c) find the variable cost if the wage is 20kr. (The expression must show how the variable cost varies with output). (d) find the average variable cost as a function of output. (e) find the marginal cost as a function of output. (f) Does the firm exhibit constant, increasing or decreasing returns to scale? What does it mean?

Answer rating: 100% (QA)

Explanation i This is because when the inputs increase there are i... View the full answer