Waec Model Questions Vol1 2018 Economics Question 4

Practice essay / theory question 4 from the 2018 Waec Model Questions Vol1 Economics examination. This question covers Production .

Waec Model Questions Vol1 2018 Economics Essay / Theory
Topic: Production
Question 4 WAEC_MODEL_QUESTIONS_VOL1 • 2018 • ECONOMICS • essay

A garment factory produces shirts using labour (L) and capital (K). The short‑run production function is given by Q = 5 L^{0.5} K^{0.5}, where Q is output in dozens of shirts, L is labour‑hours, and K is units of capital equipment.

Question Parts

( a )
Derive the expressions for the marginal product of labour (MPL) and the marginal product of capital (MPK). Then write the formula for the marginal rate of technical substitution (MRTS) of labour for capital.
( b )
The factory has a total cost budget of ₦10,000 for the production period. The wage rate for labour is ₦200 per labour‑hour and the rental cost of a unit of capital is ₦500. Determine the combination of L and K that maximises output subject to the cost constraint.
( c )
Using the optimal values of L and K obtained in part (b), calculate the maximum output (in dozens of shirts) the factory can produce.
( d )
Explain why, even though the firm can increase output by adding more labour while keeping capital constant, the marginal product of labour eventually falls. Relate your explanation to the concept of diminishing marginal returns.

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About This Question

This is Waec Model Questions Vol1 2018 Economics Question 4. It is one of the essay questions from the 2018 Waec Model Questions Vol1 Economics examination.

The question covers Production .

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