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l. (24 points) Consider the following CES production function: Q = m, K) = {w + MW. (:1) Check Whether this production function exhibits increasing return to scale, constant return to scale, or decreasing return to scale. (b) Find the elasticity of substitution of this CES production function. (c) Find the elasticity{ of substitution of a CobbDouglas production function [c.g., IIIQ = 1&4. + aim? 1" hfnL). How is the CobbDouglas production function related to the more general CES function? Explain. (d). Derive the factor demand functions, L709 , W; 1') and 1?an , w; r). (e). Suppose you estimate g 2 1X2, What is the rm's longmu total cost function?\" (f). Given 9 = 1/12, What is the market price in a longrun perfect competitive equilibrium} 3. CES Aggregate Production Function The Constant Elasticity of Substitution (CES) production function is gaining popularity in the economics literature. Duffy and Papageorgiou (2000) use this production function. Suppose the aggregate production function is given by: Y = A((1 - B) Ke + BNP) VP where A is TFP, K and N are capital and labour inputs, and 0 -1. 2. Show that, on an isoquant of the CES function (i.e., assuming ( is constant at Q = Qo), of K/dL' >0. 3. Consider the following questions: (a) The CES production function rules out p = -1. If p = -1, however, what would be general shape of the isoquants for positive K and L? [Hint: Write down dK/dL]. (b) Is the elasticity of substitution a defined for p = -1? What is the limit of gas p - 1? (c) Interpret economically the results for parts (a) and (b).The Social Contract Theory tells us we must follow whatever moral and legal rules the government decides upon. O True O False QUESTION 14 The Social Contract Theory tells us we must follow whatever moral rules society decides upon. O True O False QUESTION 15 What are three bad things about the Social Contract Theory? Why are they bad things? TTT Arial v 3 (12pt) ~ T - - - - 2 2 Path: p Words:0 / QUESTION 16 What are three good things about the Social Contract Theory? Why are they good things? TTT Arial 3 (12 pt) ~ T - - - - a