Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I'm having trouble with this question. Suppose w=4, r=16, and the production function is 0:49L0-7K0-3. For this production function MPL=34.3(K/L)'3 and MPK=14.7(L/K)'7. A. Write the

I'm having trouble with this question.

image text in transcribed
Suppose w=4, r=16, and the production function is 0:49L0-7K0-3. For this production function MPL=34.3(K/L)'3 and MPK=14.7(L/K)'7. A. Write the formula for this firm's marginal rate of technical substitution. When this firm uses the same amount of labour as capital, MRTS = B. Suppose the firm wants to produce 00:993. Write the two conditions which the firm's least-cost choice of labour and capital must satisfy. The least-cost way for this firm to produce output level on is to choose L= and K: . In this case the firm's total cost will be S C. Give the equation for this firm's total cost. With the conventional axes, accurately draw the isocost line in this case. The slope of this isocost line is and the vertical intercept is . Now sketch a representative isoquant for 00 passing through the firm's choice of labour and capital. D. Suppose the union doubles wages. With its current use of inputs, the firm's total cost is now $ . Draw the new isocost line. It has slope and vertical intercept E. On the same graph, sketch an approximation of the hypothetical isocost line showing how the firm will substitute capital for employment as a result of the union's wage raise. Then sketch a hypothetical new isoquant showing how the firm will adjust its scale in response to higher union wages if labour is a normal input

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Mining And The State In Brazilian Development

Authors: Gail D Triner

1st Edition

1317323580, 9781317323587

More Books

Students also viewed these Economics questions

Question

14. Gives credit to others when credit is due

Answered: 1 week ago

Question

1. Maintain my own perspective and my opinions

Answered: 1 week ago