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15. Potamia The production function for unpaved roads in Putamia is approximately: M=1.8L0.2B0.8 where: M is the length of road constructed L is labor used
15. Potamia The production function for unpaved roads in Putamia is approximately: M=1.8L0.2B0.8 where: M is the length of road constructed L is labor used (in 1000 person-hours); and B is the machine-hours of bulldozers (a) When labor costs $500/1000 he and bulldozers $500/hr, in what ratio should labor and bulldozers be used? (b) If L is constrained ( 5100 ), how would this change the optimal ratio of l to B ? (You may find it useful to graph the cxparsion path). (c) At the invitation of the Prime Minister, you attend a mecting of the Potamian cabinct. The Minister for Industrial Development observes that, in developed nations, the B/L ratio is higher than it is in Potamia, and that progress is synunymous with increasing that ratio. The Labor Minister disagrees - the M/L ratio is the one that Potansia must increase, at almost any price, if it is to join the rechnically advanced world. Comment. 15. Potamia The production function for unpaved roads in Putamia is approximately: M=1.8L0.2B0.8 where: M is the length of road constructed L is labor used (in 1000 person-hours); and B is the machine-hours of bulldozers (a) When labor costs $500/1000 he and bulldozers $500/hr, in what ratio should labor and bulldozers be used? (b) If L is constrained ( 5100 ), how would this change the optimal ratio of l to B ? (You may find it useful to graph the cxparsion path). (c) At the invitation of the Prime Minister, you attend a mecting of the Potamian cabinct. The Minister for Industrial Development observes that, in developed nations, the B/L ratio is higher than it is in Potamia, and that progress is synunymous with increasing that ratio. The Labor Minister disagrees - the M/L ratio is the one that Potansia must increase, at almost any price, if it is to join the rechnically advanced world. Comment
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