Hi, I am doing some revision questions to keep up with some course work, and I am afraid that the course is starting to get away from me slightly.

I would be very much obliged if someone would be kind enough to give me a brief explanation about the following questions...

- Suppose the output of a firm is given by Y = KL where K denotes the number of units of capital, L denotes the number of units of labour, and Y denotes the number of units of output

What is the first derivative of Y with respect to K?

Answer:

Zero

None of these

L

K

KL

I think the answer is 1 (i.e. none of these) as the units are to the power of 1, but am not sure.

**Question 2 ** - Suppose the output of a firm is given by Y = KL where K denotes the number of units of capital, L denotes the number of units of labour, and Y denotes the number of units of output

What is the second derivative of Y with respect to K? How would you interpret this?

Answer

Second derivative of Y with respect to K is KL.

This means that the marginal product of output with respect to capital increases as capital increases.

Second derivative of Y with respect to K is K.

This means that the marginal product of output with respect to capital increases as capital increases.

Second derivative of Y with respect to K is L.

This means that the marginal product of output with respect to capital increases as capital increases.

Second derivative of Y with respect to K is 0.

This means that the marginal product of output with respect to capital does not vary as capital increases.

Based on my previous answer, I have to go with none, but doubting I understand this part either...

Uggggh, exams coming up soon, and to be honest, on this part of the course, I am clueless, would really really appreciate some help.

Thanks so much.