A firm has the following production function:
q = (L1/3 + K1/3)3
a. Determine the returns to scale for this function.
b. Determine the MRTS.
c. Determine the Elasticity of Substitution.
a. CRTS
b. MRTS = -(L/K)-2/3
c. E = 3/2
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An "increase in demand" means that
A) the demand curve has shifted to the left. B) price has declined and consumers want to purchase more of the good. C) the demand curve has shifted to the right. D) the price of the good can be expected to decline, assuming supply stays constant.
If the price of X and Y are $2 and $4 per unit, respectively, to maximize total utility this consumer should buy:
A) 1 units of X and 1 units of Y. B) 2 units of X and 2 units of Y. C) 1 units of X and 2 units of Y. D) 5 units of X and no units of Y.
When the price of hamburger went from $3 to $4 a pound, the quantity demanded of buns changed from 30 to 25 packages a day. The cross-price elasticity of demand for buns (using the initial value formula) is:
A. 1.4. B. 0.5. C. -0.5. D. -1.4.
Ford F-150 trucks, Production of this good is likely to fluctuate _____ fluctuations of real GDP during the business cycle.
Fill in the blank(s) with the appropriate word(s).