A firm uses two inputs, capital (K) & labour (L). Given the production function: Q(K.L) = (KLO) a) Is this a long run or short run production function? Explain. If this is a short run production function, write down an example of a long run production function. If this is a long run production function, write down an example of a short run production function. b) What are the conditions that m must satisfy so that the production function exhibit increasing, constant or decreasing returns to scale? Explain. c) Calculate the marginal rate of technical substitution. d) Use the isoquant-isocost analysis and draw a graph to illustrate how firms decide the efficient method of production. You do not need label the axis with specific numbers.
A firm uses two inputs, capital (K) & labour (L). Given the production function: Q(K.L) = (KLO) a) Is this a long run or short run production function? Explain. If this is a short run production function, write down an example of a long run production function. If this is a long run production function, write down an example of a short run production function. b) What are the conditions that m must satisfy so that the production function exhibit increasing, constant or decreasing returns to scale? Explain. c) Calculate the marginal rate of technical substitution. d) Use the isoquant-isocost analysis and draw a graph to illustrate how firms decide the efficient method of production. You do not need label the axis with specific numbers.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Part C D

Transcribed Image Text:A firm uses two inputs, capital (K) & labour (L). Given the production function:
Q(K.L) = (KL)
a) Is this a long run or short run production function? Explain. If this is a short run
production function, write down an example of a long run production function. If this
is a long run production function, write down an example of a short run production
function.
b) What are the conditions that m must satisfy so that the production function exhibit
increasing, constant or decreasing returns to scale? Explain.
c) Calculate the marginal rate of technical substitution.
d) Use the isoquant-isocost analysis and draw a graph to illustrate how firms decide
the efficient method of production. You do not need label the axis with specific
numbers.
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 1 images

Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you


Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON

Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON


Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON

Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON

Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning

Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education