a) What is implied by the assumption that the economy is competitive for the returns to the factors of production? b) Beginning with the Cobb-Douglas production function, derive the marginal products of capital and labour.

a) What is implied by the assumption that the economy is competitive for the returns to the factors of production? b) Beginning with the Cobb-Douglas production function, derive the marginal products of capital and labour.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Isocost and Isoprofit Curve Analysis

An isocost curve in the production theory that is a crucial part of economics depicts different combinations of factor inputs at a given market cost. In other words, this shows all the combinations of production factors that cost the same for the firm to employ. Usually, this can be depicted as a downward sloping straight line when the firms act as the price-takers in the factor markets. The slope of this mainly depicts the relative prices of different production factors.

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which of the following statements is true? 1. if the marginal product of labour is higher than the marginal product of capital, then the firm uses more labour than capital in the short run. 2.if the wage rate for labour is lower than the cost of capital, then the firm uses more labour than capital in the short run. 3. if for a given amount of initial capital, the production functions means more labour is needed than capital, then the firm uses more labour than capital in the short run. 4. if for a given amount of initial labour, the production function means that more labour is needed than capital, then the firm uses more labour than capital in the short run.
Please Show Each and Every Working VERY CLEARLY! marginal productivity