Show that Euler’s theorem implies that, for a constant returnsto-scale production function q 5 f 1k, l2, q 5 fkk 1 fll.

Use this result to show that, for such a production function, if MPl . APl then MPk must be negative. What does this imply about where production must take place? Can a firm ever produce at a point where APl is increasing?

Analytical Problems