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Erfle, Fall 2012, midterm 3 180 1.34 total) Steve is once again producing questions, Q. He is considering two production processes, R & S: 180
Erfle, Fall 2012, midterm 3 180 1.34 total) Steve is once again producing questions, Q. He is considering two production processes, R & S: 180 ID# -0.5 R(L,K) = 9L0.5 +6K and S(L,K) = 15.1L0.2K0.3 R & S produce equally good Qs and can be used interchangeably. Place your final answers in the boxes below. For all parts, suppose P= w = $1 and Pk=r= $1. A,12) What are MPL, MPK and MRTS for each process. i) Is either process homogeneous? If so, what is the degree of homogeneity? What are Steve's returns to scale using R or S? B,5) How many questions can he produce given (L,K) factor bundle Fo= (100, 100)? What is the ATC of production for each process (to nearest $0.01)? i) Does one process dominate the other at Fo? C,5) Is Fo cost minimizing for either process? If not, should more or less L be used? Explain. D,10) Derive exact answers (to nearest 0.01) for how many units of L and K would be required to produce 200 units of output in this instance. What is MRTS there? What is ATC for each process (to nearest $0.01)? E,2) Which production process should Steve choose? Briefly explain your answer. (Yngisor 30 tush Loy elsbom Ai) Bi) C explain) E) sort tettre udl tud ayabiled att hansb olsa ession models deman cinemalomoo 10 R man adlar) zal Isbasigis suidw ni boyu isuare ed ei tedW (10 Part A (equations) MPK || S= R S Nam MPL Part B (values at Fo to Q(Fo) ATC C) Is Fo cost min? YN TLAL MRTS nog D) Cost min. (L,K) to produce Q-200 given w&r (to 0.01) L K MRTS ATC TE
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