Question
a)Draw three isoquants, choosing whichever level of Q you prefer (pin down the level of Q at a given value and then find combinations of
a)Draw three isoquants, choosing whichever level of Q you prefer (pin down the level of Q at a
given value and then find combinations of K and L returning that specific level of Q; if the
function is non-linear, a combination of 4-5 points might be enough to give a rough idea of the
shape of the isoquant).
b) Compute the marginal product of each input and indicate whether they are decreasing, constant
or increasing.
c) Compute the marginal rate of technical substitution.
d) Indicate whether the functions exhibits decreasing, constant or increasing returns to scale.
e) Consider the following isoquants (the red L-shaped functions), drawn from a production function
where inputs (capital and labor) are said to be perfect complements; the isoquants are for Q=1
2
(the isoquant on the left), Q=3 and Q=7 (the isoquant on the right). The black line is L = K/2
.
Explain the behavior of this production function. If the firm wants to produce 3 units of output
and inputs are costly, how much inputs should it use?
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