6.15. Suppose that a firms production function is given by Q ! KL K, with MPK...

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6.15. Suppose that a firm’s production function is given by Q ! KL " K, with MPK ! L " 1 and MPL ! K. At point A, the firm uses K ! 3 units of capital and L ! 5 units of labor. At point B, along the same isoquant, the firm would only use 1 unit of capital.

a) Calculate how much labor is required at point B.

b) Calculate the elasticity of substitution between A and B. Does this production function exhibit a higher or lower elasticity of substitution than a Cobb–Douglas function over this range of inputs?

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Microeconomics

ISBN: 9780470563588

4th Edition

Authors: David Besanko, Ronald Braeutigam

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