The Anchoring and Adjustment Heuristic Copy the two multiplication problems listed below on separate pieces of paper. Show Problem A to at least five friends, and show Problem B to….
Show what happens to the total, marginal, and average products of labor as a result.
Jerusha, a woodworker, builds coffee tables using both labor (L) and tools (capital, or K). Her production function for coffee tables is a Cobb-Douglas production function: Q = 4K^5 L^5 . a. Can Jerusha build any coffee tables without tools? b. Can Jerusha completely mechanize coffee table production? c. Jerusha currently has 16 tools, and in the short run can neither acquire more tools nor sell existing tools. Her woodshop is capable of holding up to 49 employees. What is Jerusha's short-run production function? d. Graph the production function you found in (c), with labor on the horizontal axis and output on the vertical axis. (Hint: Don't plot every possible amount of labor; instead, choose convenient levels of L that are perfect squares: 0, 1, 4, 9, etc.) e. Determine the average and marginal products of labor at each level of labor you worked with in (d). (Hint: To compute the marginal product of the 25th worker, you'll need to figure out how much Jerusha would produce with both 25 and 26 workers.) f. Suppose that overnight, 7 of Jerusha's machines fail. Show what happens to the total, marginal, and average products of labor as a result.