Suppose a farmer is using two inputs, labour (L) and capital (K), to produce the same amount of wheat (i.e. 100 tons of wheat). The production function is given by L0.5 + K0.33 a) Discuss any three (3) characteristics of the model described above. b) Explain how it would be possible for a farmer to use L and K to produce the same amount of wheat. c) Derive MPP of L and MPP of K. d) Determine the marginal rate of substitution of L and K. e) Prove, algebraically, that the Marginal Rate of Substitution (MRS) between L and K is
Suppose a farmer is using two inputs, labour (L) and capital (K), to produce the same amount of wheat (i.e. 100 tons of wheat). The production function is given by L0.5 + K0.33 a) Discuss any three (3) characteristics of the model described above. b) Explain how it would be possible for a farmer to use L and K to produce the same amount of wheat. c) Derive MPP of L and MPP of K. d) Determine the marginal rate of substitution of L and K. e) Prove, algebraically, that the Marginal Rate of Substitution (MRS) between L and K is
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please answer C and D
Transcribed Image Text:Suppose a farmer is using two inputs, labour (L) and capital (K), to produce the same amount
of wheat (i.e. 100 tons of wheat). The production function is given by L0.5 + K0.33
a) Discuss any three (3) characteristics of the model described above.
b) Explain how it would be possible for a farmer to use L and K to produce the same
amount of wheat.
c) Derive MPP of L and MPP of K.
d) Determine the marginal rate of substitution of L and K.
Prove, algebraically, that the Marginal Rate of Substitution (MRS) between L and Kis
given by MRSLK = -MPPL/MPPK.
f) Explain why the total change in wheat output along the isoquant curve is equal to zero.
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