Vietnam-based company VietBook specialises in digital book printing for academic and educational publishers across Europe. Every year, its automated workflow produces several hundred thousand short-run and single-copy books for customers in the Netherlands, Belgium and Germany. Technology has revolutionised printing for the firm, and given them a huge boost in efficiency. With this increased efficiency and consistency, VietBook can print several million book pages each week.

In the future, VietBook is considering a labour-less workforce but knows that technology must in- crease so that the same level of productivity can be maintained. Currently, VietBook has the following production function

Q(K, L) = A [bK + (1 b)L]1/ (1)

Where

(i) A denotes firm's technology (constant)

(ii) bisaconstant(0

(iii) K and L denote capital and labour, respectively

(a) What is the marginal rate of technical substitution? Note:

MRTS: MPK/MPL

M PK is the marginal products of capital M PL are the marginal products of labour

(b) Show that the marginal products satisfy the following relationship:

K Q + LQ = Q. K L

(c) Provide an interpretation of the production function equation.