Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
![Q2 (c)
What are the scale and substitution effects for this firm? Calculate them, and show them on a
graph.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbc940672-f56b-4a37-98a8-27d1ab935186%2F988c684a-2ea3-49af-a850-3a373a1a4aae%2Fjz2fbvc_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Q2 (c)
What are the scale and substitution effects for this firm? Calculate them, and show them on a
graph.
![Q2 (a)
A firm operates in a perfectly competitive output market and a perfectly competitive input
market.
The production function for the firm is:
F(N, K) = NK
The price of labour is $10, and price capital $20.
If the firm needed to produce 100 units, how much capital and how much labour should they use
in the long-run?
+ Drag and drop an image or PDF file or click to browse...
Q2 (b)
If the wage rate increased to $20, and the first now changes their production to 50 units of
output. How much labour should they use? How much capital?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbc940672-f56b-4a37-98a8-27d1ab935186%2F988c684a-2ea3-49af-a850-3a373a1a4aae%2F77peglq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Q2 (a)
A firm operates in a perfectly competitive output market and a perfectly competitive input
market.
The production function for the firm is:
F(N, K) = NK
The price of labour is $10, and price capital $20.
If the firm needed to produce 100 units, how much capital and how much labour should they use
in the long-run?
+ Drag and drop an image or PDF file or click to browse...
Q2 (b)
If the wage rate increased to $20, and the first now changes their production to 50 units of
output. How much labour should they use? How much capital?
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