A shortrun production function was estimated as Q 0003L3 0

A short-run production function was estimated as Q = -0.003L3 + 0.18L2 What is average product when it is at its maximum level? A) 18.9 B) 5.4 C) 2.7 D) 2.4 8.1

Solution

Differentiating Q wrt L and putting this equal to 0 we get => -0.009L^2 + 0.36L = 0

=> 0.36L = 0.009L^2

=> L = 40.

Now at L = 40, Q = 96. Since Q is greater than 0 we know that for L=40 Q =96 is highest / maximum.

Therefore, Average Product = 96/40 = 2.40

Option D. 2.4

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