UK Economics Short Run Production Function Excel Sheet

Complete the empty cells on the first sheet of the spreadsheet (labeled Production) before attempting the questions.  You will be allowed three attempts.

The values in the highlighted cells on the top rows of both sheets are parameters that we will want to be able to change. (Recall that you can use absolute references like $B$1 to use these values in a formula without it getting rewritten when copied to a new cell.) To complete the spreadsheet, you will want to enter formulas in the empty rows.

On the Production sheet, Fixed K is the number of units the firm has to work with during the current production period. (This is similar to the example in the notes, where we assumed that capital was fixed in the short run but labor could be varied.) We want to examine what happens with different values of L, i.e. the number of units of labor hired, in column A. Given the production function , find the value of Q (column B) when the various amounts of labor are combined with the fixed capital. Given what you’ve found, what is the marginal product of labor (MPL) at different values of L? (This is tricky, but there’s at least two good ways to do it: (a) use calculus to find it exactly or (b) estimate the value of MPL at a given L by examining the change between two values of L for which the given L is the midpoint, similar to how you estimated elasticity in Principles of Micro. For example, if you want to find the MPL when L=2, you can compare the output at L=1 and the output at L=3 and use the definition given in the lecture notes.)

We will use the SR Costs sheet in a future assignment. 

You can assume that all of the parameters (K, r, & w) will be greater than zero.