Question

A firm initially has a linear production​ function, qequals13Lplus20K. The firm undertakes an organizational innovation that doubles the marginal product of​ labor, but does not affect the marginal product of capital. What is the new production​ function? If the productivity of labor​ doubles, then the new production function​ (as a function of L and​ K) will be________

Answer 1

Answer: q = 26L + 20K

Step-by-step explanation:

L = Labour K = Capital

Q = 13L + 20K

production fuction (q) shows us that if Capital (K) is constant adding 1 more unit of labour will increase the Production by 13. The Marginal Product of Labour is 13.

When new innovation doubles marginal product of labor, it means now 1 more unit of labour Production (Q) will increase by 26

Marginal Product of Labor = (13 x 2) = 26

the New Function

q = 26L + 20K