Consider a firm that produces a single output good Y with two input goods: labor (L) and capital (K). The firm has a technology described by the production function f : R → R, defined by f(1, k) = Vī + vk, where l is the quantity of labor and k is the quantity of capital. (a) In an appropriate diagram, illustrate the map of isoquants for the firm's production function. (b) Does the firm's technology satisfy the following properties: (i) strict monotonicity (i.e., are the marginal product of labor and the marginal product of capital strictly positive), (ii) the no-free-lunch property, (iii) constant/decreasing/increasing returns to scale? (iv)

Consider a firm that produces a single output good Y with two input goods: labor (L) and capital (K). The firm has a technology described by the production function f : R → R, defined by f(1, k) = Vī + vk, where l is the quantity of labor and k is the quantity of capital. (a) In an appropriate diagram, illustrate the map of isoquants for the firm's production function. (b) Does the firm's technology satisfy the following properties: (i) strict monotonicity (i.e., are the marginal product of labor and the marginal product of capital strictly positive), (ii) the no-free-lunch property, (iii) constant/decreasing/increasing returns to scale? (iv)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider a firm that produces a single output good Y with two input
goods: labor (L) and capital (K). The firm has a technology described
by the production function f : R? → R+ defined by
f(1, k) = Vĩ + vk,
where l is the quantity of labor and k is the quantity of capital.
(a) In an appropriate diagram, illustrate the map of isoquants for the
firm's production function.
(b) Does the firm's technology satisfy the following properties: (i)
strict monotonicity (i.e., are the marginal product of labor and the
marginal product of capital strictly positive), (ii) the no-free-lunch
property, (iii) constant/decreasing/increasing returns to scale? (iv)
1

(c) What is the firm's marginal rate of technical substitution?

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