# solution

Harpic Corp. Manufactures plastic broom and mop holders, and the production function for these holders is expressed as:

Q = 30L 0.85K0.20

Where, Q = Number of plastic holders produced per day

K = Units of capital input per day

L = Labor input in working hours per day

Assuming K = 1000 and L = 100, calculate both the average and marginal products of

Q = 50K0.6L0.5

The firm currently employs 20 units of capital at a cost of RM75 per unit and 25 units of labour at a cost of RM50 per unit.

(a)Based on the current inputs used, compute the level of output.

(b) Compute the current total costs.

(c) Given the current input usage, is the firm operating efficiently.

(d) Derive the equation path equation.

(e) Does the production function exhibits increasing, constant or decreasing returns to scale?

Explain.

(f) Determine the percentage increase in output if both labour and capital are each increased

by 15%?

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