I’m not sure how to approach this question, so I would really appreciate if you could do it and show me the steps. Thank you! For the following,…

Hi! I’m not sure how to approach this question, so I would really appreciate if you could do it and show me the steps. Thank you!

For the following, consider a typical short-run production scenario:

a.) Assuming that MPL is greater than APL at low levels of output, draw a graph of curves that represent MPL and APL at various levels of labor. In a sentence or two, explain how changes in APL are determined by the level of the MPL.

b.) Draw a graph illustrating the standard representation of AFC, AVC, AC & MC. In a sentence or two, explain why MC crosses AVC and AC where it does.

c.) Now consider the graph of a Cobb-Douglas production function in the short-run: q=(NL^(1/2))(K^(1/2)), where N>0 and K bar (symbol where bar is over top of K) is some fixed amount of capital.

i. Briefly explain how we can identify MPL and APL from the graph.

ii. Show the point where APL is at its maximum on your graph and label that labor level L*. At L*, is the MPL greater than, less than, or equal to APL? Explain in a sentence how your graph of the production function illustrates your answer about the relationship between MPL and APL at L*.

 
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