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The production function of a good is f(L) = L0

Economics Dec 05, 2020

The production function of a good is f(L) = L0.5 where L is labor.

Labor supply is function of wages given the function L = 90 + 1.1w3

What is the productivity of wage at wage level equal to $10?

Thank's

Abdulrahim Taysir

Expert Solution

When wage = 10

Then labor supply is

L = 90 + 1.1W³

^{L = 90 + 1.1× 10*3}

^{L = 90 + 1100}

^{L = 1190}

^{now to find out productivity of labor we differentiated the production function with respect to L}

F'(L) = 0.2/L*0.5

F'(1190) = 0.2/ (1190)*0.5 = 0.2/34.49 = 0.005

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