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Besanko & Braeutigam – Microeconomics, 5th edition Solutions Manual
Chapter 6
Inputs and Production Functions
Solutions to Review Questions

1. We said that the production function tells us the maximum output that a firm can
produce with its quantities of inputs. Why do we include the word maximum in this
definition?
The production function tells us the maximum volume of output that may be produced
given a combination of inputs. It is possible that the firm might produce less than this
amount of output due to inefficient management of resources. While it is possible to
produce many levels of output with the same level of inputs, some of which are less
technically efficient than others, the production function gives us the upper bound on (the
maximum of) the level of output.
2. Suppose a total product function has the “traditional shape” shown in Figure 6.2.
Sketch the shape of the corresponding labor requirements function (with quantity of
output on the horizontal axis and quantity of labor on the vertical axis).
The labor requirements function, which is the inverse of the production function, tells us
the minimum amount of labor that is required to produce a given amount of output.
30
25
20
15
L
10
5
0
0 50 100 150 200 250
Q
3. What is the difference between average product and marginal product? Can you sketch
a total product function such that the average and marginal product functions coincide
with each other?
Copyright © 2014 John Wiley & Sons, Inc. Chapter 6 - 1

The average product of labor is the average amount of output per unit of labor.
Total Product Q
APL  
Quantity of Labor L
The marginal product of labor is the rate at which total output changes as the firm
changes its quantity of labor.
Change in Total Product Q
MPL  
Change in Quantity of Labor L
The total product function in the graph below Q  3L , which is linear, would have the
average and marginal products coincide. In particular, for all values of Q we would have
APL  MPL  3 .
250
200
150
Q
100
50
0
0 10 20 30 40 50 60 70
L
4. What is the difference between diminishing total returns to an input and diminishing
marginal returns to an input? Can a total product function exhibit diminishing marginal
returns but not diminishing total returns?
With diminishing total returns to an input, increasing the level of the input will decrease
the level of total output holding the other inputs fixed. Diminishing marginal returns to
an input means that as the use of that input increases holding the quantities of the other
inputs fixed, the marginal product of that input will become less and less. Essentially,
diminishing total returns implies that output is decreasing while with diminishing
marginal returns we could have output increasing, but at a decreasing rate as the amount
of the input increases.
It is entirely plausible to have a total product function exhibit diminishing marginal
returns but not diminishing total returns. This would occur when each additional unit of
an input increased the total level of output, but increased the level of output less than the

previous unit of the input did. Essentially, this occurs when output is increasing at a
decreasing rate as the level of the input increases.
5. Why must an isoquant be downward sloping when both labor and capital have positive
marginal products?
If the marginal product of labor is positive, then when we increase the level of labor
holding everything else constant this will increase total output. To keep the level of
output at the original level, we need to stay on the same isoquant. To do so, since the
marginal product of capital is positive we would then need to reduce the amount of
capital being used. So, to keep output constant, when the level of one input increases the
level of the other input must decrease. This negative relationship between the inputs
implies the isoquant will have a negative slope, i.e., be downward sloping.
6. Could the isoquants corresponding to two different levels of output ever cross?
No, as with indifference curves, isoquants can never cross. For example, suppose we
draw isoquants for two levels of output Q1 and Q2 with Q2  Q1 . In addition, suppose
that these isoquants crossed at some point A as in the following diagram.
Capital
C
B A
Q2
Q1
Labor
Because A and B are on Q2, both achieve the same level of output. Since A and C are on
Q1, both achieve the same level of output. This would imply that B and C achieve the
same level of output. However, this is not possible since point C contains more of both
inputs which would achieve a higher level of output. Therefore, isoquants cannot cross.
7. Why would a firm that seeks to minimize its expenditures on inputs not want to operate
on the uneconomic portion of an isoquant?
By operating on the uneconomic portion of an isoquant, the firm would be using a

combination of inputs in which one of the inputs has a negative marginal product, i.e.,
increasing the input decreases the level of total output. At a point such as this, the firm
could increase output by decreasing the level of the input. By decreasing the level of the
input, the firm could decrease total cost. Thus, if a firm were operating on the
uneconomic region of an isoquant it could simultaneously increase output and decrease

total cost. Thus, a cost-minimizing firm would never operate on this portion of an
isoquant because it would always take advantage of this opportunity.
8. What is the elasticity of substitution? What does it tell us?
The elasticity of substitution measures how the marginal rate of technical substitution of
labor for capital changes as we move along an isoquant. Essentially this value tells us the
level of substitutability between capital and labor, i.e., how easily the firm can substitute
capital for labor to maintain the same level of total output.
9. Suppose the production of electricity requires just two inputs, capital and labor, and
that the production function is Cobb–Douglas. Now consider the isoquants corresponding
to three different levels of output: Q = 100,000 kilowatt-hours, Q = 200,000 kilowatt-hours,
and Q = 400,000 kilowatt-hours. Sketch these isoquants under three different assumptions
about returns to scale: constant returns to scale, increasing returns to scale, and decreasing
returns to scale.
Decreasing Returns to Scale
1,000
750
Capital
Q=400,000
500
250
Q=200,000
Q=100,000
-
- 250 500 750 1,000
Labor
With decreasing returns to scale the firm needs to more than double inputs to double
output. Equivalently, doubling inputs less than doubles output.

Constant Returns to Scale
1,000
750
Capital
500
Q=400,000
250
Q=200,000
- Q=100,000
- 250 500 750 1,000

Labor
With constant returns to scale the firms needs to double inputs to double output.
Increasing Returns to Scale

Q=100,000
1,000
Q=200,000
750 Q=400,000
Capital
500
250
-
- 250 500 750 1,000
Labor
With increasing returns to scale the firm needs to less than double the inputs to double the
output. Equivalently, doubling inputs more than doubles output.

Solutions to Problems
6.1 A firm uses the inputs of fertilizer, labor, and hothouses to produce roses. Suppose that
when the quantity of labor and hothouses is fixed, the relationship between the quantity of
fertilizer and the number of roses produced is given by the following table:
a) What is the average product of fertilizer when 4 tons are used?

b) What is the marginal product of the sixth ton of fertilizer?
c) Does this total product function exhibit diminishing marginal returns? If so, over what
quantities of fertilizer do they occur?
d) Does this total product function exhibit diminishing total returns? If so, over what
quantities of fertilizer do they occur?
Q 2200
a) APF    550 .
F 4
Q 2600  2500
b) MPF    100 .
F 65
c) Diminishing marginal returns set in when MPF for some unit is lower than MPF
for the previous unit. This occurs for F  3 .
d) Diminishing total returns set in at the point where total output begins to fall. This
occurs for F  6 .
6.2. A firm is required to produce 100 units of output using quantities of labor and capital
(L, K) = (7, 6). For each of the following production functions, state whether it is possible to
produce the required output with the given input combination. If it is possible, state
whether the input combination is technically efficient or inefficient.
a) Q = 7L + 8K
b) Q = 20√KL
c) Q = min(16L, 20K)
d) Q = 2(KL + L + 1)
a) The input combination gives Q = 97 so it is infeasible.

b) Q = 129.6 which is greater than 100, so feasible, but inefficient.
c) Q = 112 so again feasible but inefficient.

d) Q = 100 therefore the required output is feasible and the input combination is
efficient.
6.3. For the production function Q = 6L2 − L3, fill in the following table and state how much
the firm should produce so that:
a) average product is maximized
b) marginal product is maximized
c) total product is maximized
d) average product is zero
The completed table is shown below:

L Q
0 0
1 5
2 16
3 27
4 32
5 25
6 0
a) You can calculate the average product at each point by just dividing total output
by L. The values obtained are 0,5,8,9,8,5,0. Therefore Average Product is
maximized when L = 3.
b) The marginal product at values 1 through 6 are respectively: 5,11,11,5,–7, –25.
Therefore both the second and the third unit of L give the greatest marginal
increase in output [if you use calculus techniques it can be seen that marginal
product is maximized when L = 2].
c) From the Table it is clear that total product is maximized when L = 4.
d) Average Product will be zero only when Total Product is zero. This happens when
L = 6.

6.4. Suppose that the production function for DVDs is given by Q = KL2 − L3, where Q is the
number of disks produced per year, K is machine-hours of capital, and L is man-hours of
labor.
a) Suppose K = 600. Find the total product function and graph it over the range L = 0 to L =
500. Then sketch the graphs of the average and marginal product functions. At what level
of labor L does the average product curve appear to reach its maximum? At what level
does the marginal product curve appear to reach its maximum?
b) Replicate the analysis in (a) for the case in which K = 1200.
c) When either K = 600 or K = 1200, does the total product function have a region of
increasing marginal returns?
a)
Total Product with K=600
40,000,000
Total Product
30,000,000
20,000,000
10,000,000
-
0 100 200 300 400 500 600 700
Labor
AP and MP with K=600
200000
100000
AP
0
AP/MP
-100000 0 100 200 300 400 500 600 700

-200000
-300000
-400000 MP
Labor
Based on the figure above it appears that the average product reaches its
maximum at L = 300. The marginal product curve appears to reach its maximum
at L = 200.

b)
Total Product with K=1200
300,000,000
Total Product
200,000,000
100,000,000
-
0 500 1000 1500
Labor
AP and MP with K=1200
1000000
500000 AP
0
AP/MP
-500000 0 200 400 600 800 1000 1200 1400

-1000000
-1500000 MP
-2000000
Labor
Based on the figure above it appears that the average product curve reaches its
maximum at L = 600. The marginal product curve appears to reach its maximum
at L = 400.
c) In both instances, for low values of L the total product curve increases at an
increasing rate. For K = 600, this happens for L < 200. For K = 1200, it happens
for L < 400.
6.5. Are the following statements correct or incorrect?

a) If average product is increasing, marginal product must be less than average product.
b) If marginal product is negative, average product must be negative.
c) If average product is positive, total product must be rising.
d) If total product is increasing, marginal product must also be increasing.

a) Incorrect. When MP  AP we know that AP is increasing. When MP  AP we

know that AP is decreasing.
b) Incorrect. If MP is negative, MP < 0. But AP = Q / L can never be negative
since total product Q and the level of input L can never be negative. Thus, MP <
0 < AP, which only implies that AP is falling.
c) Incorrect. Average product is always positive, so this tells us nothing about the
change in total product. Whether or not total product is rising depends on
whether or not marginal product is positive.
d) Incorrect. If total product is increasing we know that MP  0 . If diminishing
marginal returns have set in, however, marginal product will be positive but
decreasing, but that does not preclude MP > 0.
6.6. Economists sometimes “prove” the law of diminishing marginal returns with the
following exercise: Suppose that production of steel requires two inputs, labor and capital,
and suppose that the production function is characterized by constant returns to scale.
Then, if there were increasing marginal returns to labor, you or I could produce all the
steel in the world in a backyard blast furnace. Using numerical arguments based on the
production function shown in the following table, show that this (logically absurd)
conclusion is correct. The fact that it is correct shows that marginal returns to labor cannot
be everywhere increasing when the production function exhibits constant returns to scale.
To develop the answer, suppose that we were initially producing 64 units of steel.
According to the table, we could do this with 8 units of labor and 100 units of capital.
Now, since we have constant returns to scale, if we double the amount of labor and
capital, i.e., L = 16 and K = 200, we can double output, i.e., produce Q = 128 units of
steel.
But notice from the table that the input combination L = 16 and K = 100 results in an
even greater output of Q = 256 units of steel. Thus, by reducing the amount of capital it
uses (from K = 200 to K = 100), holding the quantity of labor fixed, the firm can produce
more output! That is, the marginal product of capital is negative over this range.
We can see the same thing if we start with any other input combination. For example,
suppose the firm is initially producing 4 units of steel using 2 units of labor and 100 units

of capital. Because of constant returns to scale, if we double the amount of labor and
capital, i.e., L = 4 and K = 200, we can double output, i.e., produce Q = 8 units of steel.
But notice from the table that the input combination L = 4 and K = 100 results in an even
greater output of Q = 16 units of steel. Again, by reducing the amount of capital it uses
(holding the quantity of labor fixed), the firm can produce more output. Again, we see
that the marginal product of capital is negative.
The above calculations illustrate that a two-input production function with (a) constant
returns to scale and (b) increasing marginal returns to labor must necessarily imply that
the marginal product of capital is negative. And, of course, if the marginal product of
capital is negative, the firm can expand output by reducing the amount of capital it uses.
It could, theoretically, produce an enormous amount of steel in a backyard blast furnace.
Because this conclusion is absurd, the point of the illustration is that with constant returns
to scale, marginal returns to labor cannot be everywhere increasing. Eventually the law
of diminishing marginal returns must set in.
6.7. The following table shows selected input quantities, total products, average products,
and marginal products. Fill in as much of the table as you can:

The correct answers are shown in bold face red type.
Labor, L Total product, Q APL MPL

0 0 0 ----
1 19 19 19
2 72 36 53
3 153 51 81
4 256 64 103
5 375 75 119
6 504 84 129
7 637 91 133
8 768 96 131
9 891 99 123
10 1000 100 109
11 1089 98 89
12 1152 96 63
13 1183 91 31
14 1176 84 -7
15 1125 75 -51
6.8. Widgets are produced using two inputs, labor, L, and capital, K. The following table
provides information on how many widgets can be produced from those inputs:
a) Use data from the table to plot sets of input pairs that produce the same number of
widgets. Then, carefully, sketch several of the isoquants associated with this production
function.
b) Find marginal products of K and L for each pair of inputs in the table.
c) Does the production function in the table exhibit decreasing, constant, or increasing
returns to scale?
a) Three sample isoquants: red for production of 4 widgets (Q = 4), green for
production of 8 widgets (Q = 8), and blue for production of 12 widgets (Q = 12).
The dots represent particular combinations of inputs.

(4,2)
2
(1,1)
3
1 Q=8
Q=8
Q=4
0
L
1 2 3 4
b) Recall that marginal product of an input, say labor, is given by Q/L. If we

compute the marginal product of labor and capital at any point in the table, we
find that it always equals 2. For example, in moving from input combination (2,2)
to (3,2), we increase output from 8 to 10. Hence, MPL = (10 – 8)/(3 – 2) = 2.
c) From the table, we see that as we increase the quantity of each input by a given
proportion, the quantity produced increases by the same proportion. Hence, in
moving from input combination (1,1) to (3,3), we are tripling the quantity of labor
and capital used. As a result, the quantity of output produced triples as well.
6.9 Suppose the production function for automobiles is where Q is the quantity of
automobiles produced per year, L is the quantity of labor (man-hours) and K is the
quantity of capital (machine-hours).
a. Sketch the isoquant corresponding to a quantity of Q = 100?
b. What is the general equation for the isoquant corresponding to any level of output Q?
c. Does the isoquant exhibit diminishing marginal rate of technical substitution?
a. The Q = 100 isoquant looks like this:

b. We find the general equation of an isoquant for this production function by starting with
the production function and solving for K in terms of L. Thus, since Q = LK, the general
equation of an isoquant for this production function is
The isoquants for this production function exhibit diminishing marginal rate of technical
substitution. We can see this from the graph above which shows that the isoquant is convex to
the origin.
6.10. Suppose the production function is given by the equation Q = L√K. Graph the
isoquants corresponding to Q = 10, Q = 20, and Q = 50. Do these isoquants exhibit
diminishing marginal rate of technical substitution?
7.0
Q=50
6.0
5.0 Q=10 Q=20
Capital
4.0
3.0
2.0
1.0
0.0
0 20 40 60 80
Labor

Because these isoquants are convex to the origin they do exhibit diminishing marginal
rate of technical substitution.
6.11. Consider again the production function for DVDs: Q = KL2 − L3.
a) Sketch a graph of the isoquants for this production function.
b) Does this production function have an uneconomic region? Why or why not?
a)
50.0
Q=150
40.0
Capital
30.0 Q=100
20.0 Q=50
10.0
0.0
0 10 20 30 40
Labor
b) Because each of these isoquants has an upward-sloping portion beyond some

level of labor, each one does indeed have an uneconomic region.
6.12. Suppose the production function is given by the following equation (where a and b
are positive constants): Q = aL + bK. What is the marginal rate of technical substitution of
labor for capital (MRTSL,K) at any point along an isoquant?
For this production function MPL  a and MPK  b . The MRTSL, K is therefore
MPL a
MRTS L , K  
MPK b
6.13. You might think that when a production function has a diminishing marginal rate of
technical substitution of labor for capital, it cannot have increasing marginal products of
capital and labor. Show that this is not true, using the production function Q = K2L2, with
the corresponding marginal products MPK = 2KL2 and MPL = 2K2L.
First, note that MRTSL,K = L/K, which diminishes as L increases and K falls as we move
along an isoquant. So MRTSL,K is diminishing. However, the marginal product of capital
MPK is increasing (not diminishing) as K increases (remember, the amount of labor is

held fixed when we measure MPK.) Similarly, the marginal product of labor is increasing
as L grows (again, because the amount of capital is held fixed when we measure MPL).
This exercise demonstrates that it is possible to have a diminishing marginal rate of
technical substitution even though both of the marginal products are increasing.
6.14 Consider the following production functions and their associated marginal products.
For each production function, determine the marginal rate of technical substitution of
labor for capital, and indicate whether the isoquants for the production function exhibit
diminishing marginal rate of substitution.
Production MPL MPK MRTSL,K Diminishing Diminishing Diminishing

function marginal marginal marginal
product of product of rate of
labor? capital? technical
substitution
NO NO NO
YES YES YES
YES YES YES
NO NO YES
NO NO NO
6.15. Suppose that a firm’s production function is given by Q = KL + K, with MPK = L + 1

and MPL = K . At point A, the firm uses K = 3 units of capital and L = 5 units of labor. At
point B, along the same isoquant, the firm would only use 1 unit of capital.
a) Calculate how much labor is required at point B.
b) Calculate the elasticity of substitution between A and B. Does this production function
exhibit a higher or lower elasticity of substitution than a Cobb–Douglas function over this
range of inputs?
a) At point A, the firm produces 18 units of output. Therefore, since B is on the same
isoquant, it must be that L = 17 at B.
b) The capital-to-labor ratio at A is 3/5 and MRTSL,K = ½. At B, the capital-to-labor
ratio is 1/17, and MRTSL,K = 1/18.
Therefore the elasticity of substitution is
(1 / 17  3 / 5) /(3 / 5) 69
 .
(1 / 18  1 / 2) /(1 / 2) 68

A Cobb-Douglas production function has an elasticity of substitution of 1.

Therefore this production function has a slightly higher elasticity of substitution,
indicating a slightly greater ease of substitutability of inputs.
6.16. Two points, A and B, are on an isoquant drawn with labor on the horizontal axis and
capital on the vertical axis. The capital–labor ratio at B is twice that at A, and the elasticity
of substitution as we move from A to B is 2. What is the ratio of the MRTSL,K at A versus
that at B?
Since the capital-labor ratio at B is twice that at A, it implies that the percent change in
this ratio as we move from A to B is 100%. If we denote the percent change in the MRTS
over these two points as x then using the definition of elasticity of substitution,
100
 2, which means that %MRTS L , K  50.
%MRTS L , K
MRTS B  MRTS A MRTS A 2

Equivalently,  100  50. Solving,  .
MRTS A MRTS B 3
6.17. Let B be the number of bicycles produced from F bicycle frames and T tires. Every
bicycle needs exactly two tires and one frame.
a) Draw the isoquants for bicycle production.
b) Write a mathematical expression for the production function for bicycles.
a) This isoquants for this situation will be L-shaped as in the following diagram
Tires
6 Q=3
4 Q=2
2 Q=1
Frames
1 2 3
These L-shaped isoquants imply that once you have the correct combination of
inputs, say 2 frames and 4 tires, additional units of one resource without more
units of the other resource will not result in any additional output.
b) Mathematically this production function can be written

1
Q  min( F , T )
2
where F and T represent the number of frames and tires.
6.18. To produce cake, you need eggs E and premixed ingredients I. Every cake needs
exactly one egg and one package of ingredients. When you add two eggs to one package of
ingredients, you produce only one cake. Similarly, when you have only one egg, you can’t
produce two cakes even though you have two packages of ingredients.
a) Draw several isoquants of the cake production function.
b)Write a mathematical expression for this production function. What can you say about
returns to scale of this function?
a)
mix
1 2 3 eggs
b) The formula is # of cakes = Min{# of eggs, # of ingredients’ packages}. This

production function has constant returns to scale. To see why, let x and y denoted
the quantities of eggs and mix, respectively, and let Q denote the number of cakes
produced. The equation of our production function is: Q = Min(x,y). If we
increase each input by a factor of a, we have the following quantity of cake:
min{ax, ay} = a min{x, y} = aQ. Hence, increasing the quantities of inputs by a
given proportion results in the same proportionate increase in output, and the
production function thus exhibits constant returns to scale.

6.19. What can you say about the returns to scale of the linear production function Q = aK
+ bL, where a and b are positive constants?
If we were to scale up all inputs by a factor  (that is, replace K by K, and L by L), the
resulting output would equal Q. Therefore a linear production function has constant
returns to scale.
6.20. What can you say about the returns to scale of the Leontief production function Q =
min(aK, bL), where a and b are positive constants?
A general fixed proportions production function is of the form Q  min( aK , bL) . If we

were to scale up all inputs by a factor  (that is, replace K by K, and L by L), the
resulting output would be min( aK , bL)   min( aK , bL) = Q. Therefore the
production function has constant returns to scale.
6.21. A firm produces a quantity Q of breakfast cereal using labor L and material M with
the production function Q = 50√ML + M+ L. The marginal product functions for this
production function are
a) Are the returns to scale increasing, constant, or decreasing for this production function?
b) Is the marginal product of labor ever diminishing for this production function? If so,
when? Is it ever negative, and if so, when?
a) To determine the nature of returns to scale, increase all inputs by some factor 
and determine if output goes up by a factor more than, less than, or the same as
.
Q  50  M  L   M   L
Q  50 ML   M   L
Q   50 ML  M  L 
Q  Q
By increasing the inputs by a factor of  output goes up by a factor of  . Since
output goes up by the same factor as the inputs, this production function exhibits
constant returns to scale.
b) The marginal product of labor is

M
MPL  25 1
L
Suppose M  0 . Holding M fixed, increasing L will have the effect of
decreasing MPL . The marginal product of labor is decreasing for all levels of L .
The MPL , however, will never be negative since both components of the equation
above will always be greater than or equal to zero. In fact, for this production
function, MPL  1 .
6.22 Consider a production function whose equation is given by the formula

which has corresponding marginal products, and Show that the
elasticity of substitution for this production function is exactly equal to 1, no matter what
the values of K and L are.
ANSWER
First note that In this case that implies,
which simplifies to
Now recall that the definition of the elasticity of substitution is
Since it follows that will be exactly equal to (You can

verify this
by plugging in particular values for . Suppose, for example, , and then changes to
, an increase of 66.66 percent. Since it follows that MRTSL,K changes
from 1 to 1.5, (also an increase of 66.66 percent.) In other words, since the marginal rate of
substitution of labor for capital is proportional to the capital-labor ratio, the percentage change in
the marginal rate of substitution of labor for capital must equal the percentage change in the
capital-labor ratio. Since then using the definition of the elasticity of
substitution, it follows that,

6.23. A firm’s production function is Q = 5L2/3K1/3 with MPK = (5/3)L2/3K−2/3 and MPL =
(10/3)L−1/3K1/3.
a) Does this production function exhibit constant, increasing, or decreasing returns to
scale?
b) What is the marginal rate of technical substitution of L for K for this production
function?
c) What is the elasticity of substitution for this production function?
a) Notice that (aK)1/3(aL)2/3 = a1/3a2/3 K1/3 L2/3 = a K1/3 L2/3 = aQ. This production
function exhibits constant returns to scale.
b) MRTSL,K = MPL / MPK = 2 K/L .
c) Because this is a Cobb-Douglas production function, its elasticity of substitution

equals 1.
6.24. Consider a CES production function given by Q = (K0.5 + L0.5)2.

a) What is the elasticity of substitution for this production function?
b) Does this production function exhibit increasing, decreasing, or constant returns to
scale?
c) Suppose that the production function took the form Q = (100 + K0.5 + L0.5)2. Does this
production function exhibit increasing, decreasing, or constant returns to scale?
a) For a CES production function of the form


  1  1  1

Q   aL   bK  
 
the elasticity of substitution is  . In this example we have a CES production
function of the form
2
Q   K 0.5  L0.5  .
To determine the elasticity of substitution, either set (  1) /   0.5 or

 /(  1)  2 and solve for  .
 1
 0.5

  1  0.5
0.5  1
  2.
In either case, the elasticity of substitution is 2.

b)
2
Q  ( K )0.5  ( L) 0.5 
2
Q  ( 0.5 )( K 0.5  L0.5 ) 
2
Q    K 0.5  L0.5 
Q  Q.
Since output goes up by the same factor as the inputs, this production function
exhibits constant returns to scale.
c)
2
Q  100  ( K )0.5  ( L)0.5 
2
Q  100   0.5 ( K 0.5  L0.5 ) 
2
 100 
Q    0.5  K 0.5  L0.5   Q.
 
When the inputs are increased by a factor of  , where   1 output goes up by a

factor less than  implying decreasing returns to scale.
Intuitively, in this production function, while you can increase the K and L
inputs, you cannot increase the constant portion. So output cannot go up by as
much as the inputs.
6.25 Consider the following production functions and their associated marginal products.
For each production function, indicate whether (a) the marginal product of each input is
diminishing, constant, or increasing in the quantity of that input; (b) the production
function exhibits decreasing, constant, or increasing returns to scale.
Production MPL MPK Marginal Marginal Returns to

function product of product of scale?
labor? capital?
CONSTANT in CONSTANT in CONSTANT
L K
DIMINISHING DIMINISHING CONSTANT
in L in K
DIMINISHING DIMINISHING DECREASING
in L in K
INCREASING INCREASING INCREASING
in L in K
CONSTANT in CONSTANT in INCREASING
L K

6.26. The following table presents information on how many cookies can be produced from
eggs and a mixture of other ingredients (measured in ounces):
Recently, you found a new way to mix ingredients with eggs. The same amount of
ingredients and eggs produces different numbers of cookies, as shown in the following
table:
a) Verify that the change to the new production function represents technological progress.
b) For each production fuction find the marginal products of eggs when mixed ingredients
is held fixed at 8. Verify that when mixed ingredients is held fixed at 8, the technological
progress increases the marginal product of eggs.
a) For each pair of inputs, except those where there are no eggs or no other
ingredients, new recipe produces more cookies. Hence, the new recipe represents
technological progress.
b) MPE =Q/E, where E denotes the quantity of eggs. With mixed ingredients held
fixed at 8, we have:
MPE = (8 – 0)/(1 – 0) = 8, when E goes from 0 to 1.
MPE is zero for all subsequent changes in E.
After the technological progress we have:

Comparing the marginal products, we see that MPE (when mix equals 8 is
higher after the technological progress.

6.27. Suppose a firm’s production function initially took the form Q = 500(L + 3K).
However, as a result of a manufacturing innovation, its production function is now Q =
1000(0.5L + 10K).
a) Show that the innovation has resulted in technological progress in the sense defined in
the text.
b) Is the technological progress neutral, labor saving, or capital saving?
a) It is possible to write the two production functions as

Q1  500 L  1,500 K
Q2  500 L  10, 000 K
Since Q2  Q1 for given quantities of K and L , the firm can achieve more
output for a given combination of inputs. This innovation has therefore resulted
in technological progress as defined in the text.
b) Initially MPK  1,500 and MPL  500 implying the MRTSL, K  0.33 . After the
innovation the MPK  10,000 and MPL  500 implying the MRTSL, K  0.05 .
Since the marginal rate of technical substitution of labor for capital has decreased
after the innovation this is labor-saving technological progress.
6.28. A firm’s production function is initially Q = KL, with MPK = 0.5(√L/√K) and MPL =
0.5(√K/√L). Over time, the production function changes to Q = KL, with MPK = L and MPL
= K.
a) Verify that this change represents technological progress.
b) Is this change labor saving, capital saving, or neutral?
a) With any positive amounts of K and L, KL  KL so more Q can be produced

with the final production function. So there is indeed technological progress.
b) With the initial production function MPL K

MRTS L, K   .
MPK L
MPL K
With the final production function MRTS L, K   .
MPK L
For any ratio of capital to labor, MRTSL,K is the same for the two production
functions. Thus, the technological progress is neutral.
6.29. A firm’s production function is initially Q = KL, with MPK = 0.5(√L/√K) and MPL =
0.5(√K/√L). Over time, the production function changes to Q = K√L, with MPK = √L and
MPL = 0.5(K/√L).

a) Verify that this change represents technological progress.

b) Is this change labor saving, capital saving, or neutral?
a) With any positive amounts of K and L, KL  K L so more Q can be produced

with the final production function. So there is indeed technological progress.
MPL K
b) With the initial production function MRTS L, K   .
MPK L
With the final production function MPL 0.5K

MRTS L, K   .
MPK L
For any ratio of capital to labor, MRTSL,K is lower with the second production
function. Thus, the technological progress is labor-saving.
6.30 Suppose that in the 21st century the production of semiconductors requires two
inputs: capital (denoted by K) and labor (denoted by L). The production function takes the
form However, in the 23rd century, suppose the production function for
semiconductors will take the form In other words, in the 23rd century it will be
possible to produce semiconductors entirely with capital (perhaps because of robots).
a. Does this change in the production function change the returns to scale?
b. Is this change in the production function an illustration of technological progress?
a. No. In both the 21st and 23rd centuries, the production function for this good exhibited
constant returns to scale. In both cases, increasing inputs by a given proportion
increases output by the same proportion.
b. The change in the production function is not an example of technological progress.
This is because we do not get more output from a given combination of inputs. For
example, if L = 100, K=100, in the 21st century . In the 21st
century, with the same input combination, we would get the same output, Q = 100.

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cards are preserved in the family mansion on Lloyd’s Neck, Long
Island. Tied in a pack by a crumpled green ribbon,—which tradition
declares was a garter,—on the back of the Knave of Diamonds is
written in faded ink this inscription,—
To Angelina Lloyd, from her affectionate Uncle,
Henry Lloyd.
February 13th, 1795.

The cards (which are wonderfully fresh) are printed on coarse, thick
pasteboard, guiltless of enamelled surface or diapered back. The
descriptive matter is printed with fine type on each card, which has
either a distinguishing pip containing a number on each left-hand upper
corner, or in a lozenge is a letter, K, Q, or J, which takes the place of
the figure usually placed on the court cards of each suit.
The suits represent the four quarters of the globe. Clubs contain a
history of Africa (the name being printed across the surface of the
cornered Ace),—its area, inhabitants, products, commerce, customs,
etc.; all this valuable but obsolete information being crowded on the
surface of the ten pip cards of the suit. The “J” (Jack) shows the
principal islands which surround the continent; the “Q” (Queen) tells the
quarter of the globe to which Africa belongs, with various statistics; and
the “K” (King), the kingdoms or governments into which it is divided.
The same formula is adopted on the other cards,—the Spades being
devoted to Asia, the Hearts to Europe, and the Diamonds to America.
Among the statements on the cards we find, on the Four of Diamonds:
“The Dutch first planted colonies in New York, but these usurpers were
obliged to own the right of the English to the land.” On the “J” (Jack),
among other islands mentioned, it states that “Long Island is 140 miles
by 10. The middle is sandy.... The place called Lloyd’s Neck, from its
situation and fertility, is or might be made a paradise” (and this
sentence probably led to the purchase and preservation of these
precious cards). The chief towns of America and their population were
given as follows: Mexico, 150,000; Lima, 60,000; Quito, 60,000; Cusco,
42,000; Panama and Philadelphia, 42,000; New York, 23,000; Boston,
19,000; Newport, 6,000.
Plate 15.
What manner of game was played with these instructive cards is not
now known. They were probably valued only as a book would have
been which contained interesting information in a condensed form; and
it is more than probable, from the excellent state of preservation in
which they were found, that they were looked upon with awe by Miss
Angelina, preserved with care, but never played with.
A letter from a sprightly young lady quoted in the “Republican Court,”
written during a visit to the Van Hornes of New York, which was
probably about 1783, says: “All is a dead calm until the cards are
introduced, when you see pleasure dancing in the eyes of all the
matrons, and they seem to gain new life.” But what were the favourite
games of the dames of that city? She does not mention.
What has been called the national game of the United States, and
the one at present in fashion among many classes of society, although
perhaps not among the most refined and cultivated, is Poker. This
game has its advocates, and a historiette of its own which is too widely
known to require further comment here.
Among the terms used in playing it, and peculiar to it, are blind,
which is supposed to have been derived from “bind;” straddle, which
means to cover both the blind and the ante. The latter word may have
been derived from the French entrer, to enter; as to ante is to enter the
game by paying the stakes required.
Euchre, Commerce, Piquet, Bezique, and Whist are general
favourites; and they have superseded the old-fashioned games of Brag
(the father of Poker), Pope Joan, and others dear to the hearts of our
grandmothers.
Plate 16.
Among other ingenious means of evading the religious scruples that
forbade playing-cards, some publisher hit upon the scheme of
introducing to the public what he called “Yankee Notions.” These were
cards covered with distinctive symbols and marks of suits, and were
accompanied by a small book of rules which has been embodied in an
American edition of Hoyle for playing with them, and which contained
the following preface:—
“Believing that a settled prejudice exists with a large class of the
community against the old-fashioned cards, the publisher has issued
an entirely new style, to the introduction of which into every family
circle there cannot possibly be the least objection. These cards and the
games adapted to them are calculated to discipline and exercise the
mind.”
There are fifty cards in the pack, composed of five different suits;
namely, Faces, Flags, Eagles, Stars, and Shields, “the honour cards
being called the upper ten.”
The directions for dealing, cutting, etc. are given, and are exactly the
same as those in common use among all card-players, be they bent on
gambling or only on innocent amusement.
The publisher goes on to state that “many things will serve for
counters, as kernels of corn, or coffee, or old cards cut up. For those
who prefer something better the publisher of these cards has provided
an ample supply at a small expense.”
The difference between this pack and the ordinary cards generally
played with seems to be only in the symbols which have been placed
on them. The Flags, Eagles, etc., take the place of the Hearts,
Diamonds, Spades, and Clubs. To an unprejudiced mind the
substitution of one symbol for another would not be sufficient to excuse
the use of the “Yankee Notions” in places where ordinary playing-cards
were regarded with disfavour. Sums of money might be as well staked
and lost on Flags and Eagles as on Hearts and Diamonds, if the
players were inclined to gamble on a game; and the term “to throw” or
“to pass,” which in the rules is employed instead of “to deal,” might
soothe the scruples of some minds, although the action in both cases
were the same. That these games might be gambling, is proved by the
suggestion about the counters.
Plate 17.
The publisher of the “Yankee Notions” gives in his book of rules
many games which could be played with his cards, one of which bears
the ominous name of “Bunkum.” Another game called “John Smith” is
played under some droll rules. Among others is one which states that
“the holder of Mrs. Smith, who is always anxious to recall her truant
husband John to her side,” must recite certain verses when she calls
for him, “thinking him perhaps in doubtful company; and the position of
John is one of dread, thinking he will be caught and possibly Caudled.
The holder of Mrs. Smith will anxiously watch for the first opportunity to
get the lead and call for her man John; for when she calls, John must
go. She may say,—
‘Come forth, great John,

Thou paragon!
My voice I’m sure you know.’
He may reply,—
‘I know that voice,

I’ve got no choice;
’Tis hard, but I must go.’”
The game resembles in many respects the kindred one of “Dr.

Busby,” in which the four suits contain only face and no pip cards. The
suits being divided into four families, and the object of the game being
to collect all the families in one hand by asking for each card by name
from the right-hand neighbour, any mistake in naming over or “calling”
for the cards causes the “call” to pass to the neighbour on the left, who
then endeavours to ask for all the cards from the person who had been
previously playing. This innocent game requires no counters, cannot
possibly be used for gambling, and is an excellent exercise for the
memory.
That cards were fashionable in some localities of the United States
during the past century is proved not only by the invitations issued on
the backs of playing-cards (of which specimens exist), and which have
been already described, but also by the existence of numerous
beautiful Japanese or Chinese lacquer counter-boxes which may be
found any day carefully treasured in many families.
These boxes, which were originally imported especially for the
person who ordered them, are usually of black and gold lacquer, oval
in shape and covered with graceful arabesques of leaves and tendrils,
which surround the initial letter of the owner’s name, which was not
only painted on the cover of the large box, but was also on each one of
the tiny “fish boxes” contained inside of it. These strangely shaped little
receptacles fitted compactly into the large boxes, and could be
removed and replaced at pleasure. The centre of the box contained a
number of small trays, especially designed for the favourite and at one
time fashionable game of “Pope Joan.” Each tray bore on its bottom a
quaint figure painted in lacquer, which represented the Chinese idea of
an ordinary court card; and this tray, according to the rules of the
game, was to contain the counters when the players went through the
customary formula and paid one to the Knave, two to the Queen, three
to the King, four to the Ace, and five to “Pope Joan,” which was
represented by the nine of Diamonds. These convenient little trays
were almost a necessity when playing this game; but substitutes were
often ingeniously contrived by taking from an extra pack the necessary
cards and bending their sides up until they would hold the counters
without spilling them all over the table.
The counters, or “fish” (as our grandmothers called them), which
were imported in these foreign boxes were made of small bits of
mother of pearl which were of different sizes. Some of them were
round, some oval, and some long, slender, and shaped somewhat like
their namesakes the fish. They were usually engraved with quaint
devices, a circular space being left in the centre of the counter
intended to contain the initial letter of the owner’s name, which was
designed so as to match that placed on the boxes.
One set of counters in particular were imported by a naval officer for
his family, and were small circular disks of pearl on which strange
figures were painted in bright colours. These figures have become
obliterated in the course of years. They came from their foreign home
in a small round ivory box which contained only a limited number. They
were always used for counters, but they may have been intended by
the manufacturer for a game by themselves; and they somewhat
resemble those described by Mr. Chatto, which he classed among the
cards. Unfortunately nothing remains of the original pictures, and only
a few dabs of colour now stain the tiny pearl disks, the outlines of the
devices having been entirely obliterated.
Another most beautiful set of Chinese counters is contained in an
ivory box. They are curiously carved with minute figures in low relief,
and when first taken from their box were in regular order, and it
seemed as if their pictured sides could relate a history. Unfortunately,
the one hundred and sixty odd pieces soon became hopelessly mixed;
and the tale they could have told was never related, and is now lost
forever.
Plate 18.
Besides the cards introduced into North America by Columbus and
his sailors or by the emigrants to various parts of the country, strange
gambling instruments or sticks which may be called cards have been
found among the Indians of southeastern Alaska and Queen
Charlotte’s Islands. These original and peculiar implements are made
by the natives for their own use, and are of two kinds,—one set being
beautifully carved with strange devices of birds, animals, men, etc.; the
other set simply marked by lines of red or black paint rudely smeared
on their rounded surface, but which are quite distinct enough to
distinguish at a glance one from the other. The same game seems to
be played with either the carved or painted set, although one seems to
be only numbered, and the other to have no numbers and to rely on
the carvings to represent the value of the stick.
From what source these Indians derived their “cards” will probably
never be known. Taking into account the difference between cardboard
and cubes of wood, there is more than a fancied resemblance between
these rude toys and the cards of Asia, and this may point to the original
source. It is certain that they were not derived from the Spaniards or
other emigrants who settled on the eastern coast of America and
moved toward the west, as the emblems have nothing in common with
European cards, whereas the cards used by the Apache Indians of
Arizona show their derivation from the Spanish cards at once. These
Indians make for themselves cards from deerskin, on which they paint
in two colours—namely, red and blue—the Oros, Denari, Espadas, and
Copas of the Spanish emblems. These deerskin cards are practically
imperishable, as even the very rough usage which they undoubtedly
have cannot destroy them; and they are greatly prized by their owners,
who can seldom be induced to part with them. There are several packs
of these cards in the National Museum at Washington, and one in the
Museum at Boston.
Plate 19.
A complete set of Haida gambling-sticks is also to be found in the
National Museum; and casts of the carvings have been carefully taken
on plaster, which displays the shape of the figures more plainly than
the curved surfaces of the sticks can do. Thirty-two of these cubes
compose “a pack,” and these are contained in a leather pouch. The
game is usually played by a number of persons, who squat on the
ground in a circle around the dealer, who places the sticks in front of
him under a pile of shavings or shredded cedar bark, and draws them
out with great ceremony and hands them to the players, who receive
them with grunts, cries, and other uncouth noises. Each stick has its
value; and they are passed with great rapidity from one to the other,
the players staking considerable amounts on the game.
These cubes are made of spruce, about six inches long and half an
inch thick; on them patterns of birds, animals, fish, men, and other
devices are cut. The designs necessarily adapt themselves to the
curved surfaces, and on some are repeated, so that when the stick is
held upright the same pattern is seen back to back. This arrangement
is almost always followed, although there are exceptions to the rule.
What the designs mean and what their value is no one seems to know,
but it is quite evident that they are Totemic devices; and these
gambling-sticks are probably the most peculiar contrivances that have
ever been invented to take the place of the pictured cards or the
graven chessmen, and though not to be considered as a link between
the two, certainly contain characteristics peculiar to both.
They may be classed into suits, which can be divided as follows:
Figures, Devices, Animals, Fish, Birds, and Reptiles or Insects.
The suit of Figures has eight sticks. The first one is a man crowned,
and holding in his right hand a fan, which seems to be a strange
attribute when the climate of Queen Charlotte’s Islands is considered.
The carving on the second cube resembles that of a man seated, and
leaning his chin on his hands, his elbows resting on his knees. Two
semicircles over the head may represent a hat; fifteen notches placed
on each side of this figure may show its value. Number three displays a
seated figure, with what seems to be the soles of its feet turned
outward; four circles cut beside the figure may denote its worth. The
fourth cube represents a seated figure in profile, with one hand spread
out to show the thumb and four fingers. This stick has no marks to
denote its value, unless four notches deeply cut in its back may take
their place. The fifth stick is an interesting one, as it seems intended to
show both the face and back of the figure. Over the head are two
semicircles resembling those on number two. The hands hang on each
side, each one having but three fingers and a thumb. The carvings on
number six contain devices which resemble the lotus-flower. In a circle
is a human face, the head surmounted by the semicircular cap.
Number seven shows two grinning faces without bodies, but with arms
and large hands displayed with the palms out. Two large chevrons
divide these devices, which are cut across the stick, and not, as the
others are, up and down its length. The eighth carving represents a
hand with four well-shaped fingers and a thumb. Certain notches and
cuts which surround the hand are undecipherable.
Plate 20.
The eight succeeding cubes contain strange devices, which seem to
represent fingers, eyes, teeth, etc., but which are confused and
meaningless to the uninitiated. Number seventeen, on the contrary,
shows a spirited and lifelike carving of a beaver; and the next one a
strange-looking monster, with a large mouth and huge teeth. The
nineteenth cube has on it the head of some unrecognizable beast with
a very long snout; and the twentieth, a ferocious-looking, large-
mouthed animal. In cubes twenty-one, twenty-two, twenty-three, and
twenty-four the carvings resemble fish; twenty-two, in particular, shows
a clever representation of a huge fish, and also a duck. Twenty-five,
twenty-six, twenty-seven, and twenty-eight call to mind birds; the
twenty-sixth cube, in particular, showing most plainly the head, wings,
and claws of what may be intended for an eagle. The stick which is
numbered twenty-eight has on it a carving of a bird perched beside a
nest which contains four fledglings.
The last four sticks are as well carved and deeply cut as any of the
others in the pack, number twenty-nine bearing a spirited cut of a
beetle; but the others cannot be as easily deciphered. The carvings of
the beaver, the eagle, and the beetle represent these creatures in an
erect or upright attitude, instead of the one natural to the animal.
Whether this has some peculiar significance or not remains to be
proved.
Plate 21.
The “gambling-sticks” used by the Alaska Indians closely resemble

those already described; and they also have two kinds of “sticks,”
some of them carved and some painted. There are fifty-four cubes in
the painted pack, some of them perfectly plain or unpainted; two more
plain sticks have notched ends, which probably increases their value.
Fourteen of the sticks have stripes painted on them, but these are so
faint and blurred as to be almost unnoticeable. None of this set are
notched. Three sticks are striped with black bars, one, two, and three
in number; five sticks have red bands. Another set of six sticks have
red and black stripes, numbering from one to eight. All these sticks are
notched at one end, and, besides the bars, have on them smears of
red or black paint. The game played with the painted sticks appears to
be the same as that played with the carved ones; and the former are
also kept in a leather pouch, which is bound or tied with a leather
thong.
JAPAN.
I T is to Japan that we must turn when we wish to find the most dainty
and original of Playing-cards. This interesting nation have devised for
themselves the symbols that they use, which are so unique that they
bear no features in common with those of any other country, if we
except one device which may be an accidental one, and which will
hereafter be mentioned; otherwise the Japanese playing-cards differ
completely from those of other places, except that they are painted on
pasteboard and highly glazed or varnished.
Those writers who trace in European and other cards a resemblance
to the classes of society into which the world is divided, and
promulgate the opinion that the four suits commonly seen represent
them,—namely, the Cup or Priest, the Sword or Soldier, Money the
Merchant, and Maces the Artisan,—would find it impossible to divide
the Japanese cards in this way, as they belong distinctly to a new set
of ideas, and seem to have been originated in the Islands, where alone
they are used, and do not show, as those of other nations do, some
mark or device which betrays to the student an inherited symbol which
may be traced to the original Oriental card.
Japanese cards are of the same shape as those used by the French
and other European nations, but are very much smaller than ordinary
cards, being a little more than two inches long by one broad. They are
made of pasteboard, on the back of which black paper has been
carefully pasted over the edges of the cards so as to leave a narrow
rim to form a frame on the face of the card. The symbols are stencilled,
and the whole card varnished or enamelled, so that they are extremely
slippery.

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Inputs and Production Functions

Solutions to Review Questions

Copyright © 2014 John Wiley & Sons, Inc. Chapter 6 - 1

Copyright © 2014 John Wiley & Sons, Inc. Chapter 6 - 2

By operating on the uneconomic portion of an isoquant, the firm would be using a

Copyright © 2014 John Wiley & Sons, Inc. Chapter 6 - 3

8. What is the elasticity of substitution? What does it tell us?

Decreasing Returns to Scale

Copyright © 2014 John Wiley & Sons, Inc. Chapter 6 - 4

Constant Returns to Scale

- 250 500 750 1,000

Increasing Returns to Scale

Copyright © 2014 John Wiley & Sons, Inc. Chapter 6 - 5

a) What is the average product of fertilizer when 4 tons are used?

a) The input combination gives Q = 97 so it is infeasible.

Copyright © 2014 John Wiley & Sons, Inc. Chapter 6 - 6

The completed table is shown below:

Copyright © 2014 John Wiley & Sons, Inc. Chapter 6 - 7

Total Product with K=600

AP and MP with K=600

-100000 0 100 200 300 400 500 600 700

Copyright © 2014 John Wiley & Sons, Inc. Chapter 6 - 8

Total Product with K=1200

AP and MP with K=1200

-500000 0 200 400 600 800 1000 1200 1400

6.5. Are the following statements correct or incorrect?

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a) Incorrect. When MP  AP we know that AP is increasing. When MP  AP we

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The correct answers are shown in bold face red type.

Labor, L Total product, Q APL MPL

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b) Recall that marginal product of an input, say labor, is given by Q/L. If we

a. The Q = 100 isoquant looks like this:

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b) Because each of these isoquants has an upward-sloping portion beyond some

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Production MPL MPK MRTSL,K Diminishing Diminishing Diminishing

YES YES YES

6.15. Suppose that a firm’s production function is given by Q = KL + K, with MPK = L + 1

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A Cobb-Douglas production function has an elasticity of substitution of 1.

MRTS B  MRTS A MRTS A 2

b) Mathematically this production function can be written

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b) The formula is # of cakes = Min{# of eggs, # of ingredients’ packages}. This

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A general fixed proportions production function is of the form Q  min( aK , bL) . If we

b) The marginal product of labor is

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6.22 Consider a production function whose equation is given by the formula

First note that In this case that implies,