Tutorial 6 (Production, Costs and Perfect Competition) – 40 Marks
Question 1 (14 Marks)
1. Suppose you can produce water flasks according to the production process Q = K^2 + 4K + 12 -
6L + KL, and that when producing these flasks, you have a cost constraint expressed as 2L+
2L = 32
1.1. Calculate the marginal product of labour for this production process.
(2)
1.2. Calculate the marginal product of capital for this production process.
[2]
1.3. Using your answers for 1.2 and 1.3, calculate the optimum quantities of capital and labour
when producing the water flasks because the marginal product per rand spent on each input
needs to be equal when producing optimally.
1.4. Using the Lagrange multipliers method, calculate how many water flasks you can produce
whilst satisfying your cost constraint.
[6]
[4]