Microeconomics
Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Chapter 12.A, Problem 3QE
To determine

Graphically illustrate the isocost curve to indicate the economic efficiency.

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Consider two competitive economies that have the same quantities of labor and capital (K=L), and the same technology. The economies of the countries are described by the following Cobb–Douglas production func- tions: North Economy: Y = AK^0.7 L^0.3 South Economy: Y = AK^0.3 L^0.7   Compare the total production in these two countries and explain your answer. In which economy is the marginal product of labor larger? Explain your answer. In which economy is the labor’s share of income higher? Explain your answer. If half of workers (L) in North immigrated to South, explain how would total output, marginal produc- tivity of labor, and labor’s share of income in the two economies change?
Which graph depicts a technological breakthrough in the production of Y only?
"If the law of diminishing returns did not hold, we can produce all the food the world needs in one small patch of land." Do you agree, disagree, or agree in part? Think of land as the only fixed factor and fertilizer as the only variable factor. How much food could you grow in the patch of land if the marginal product of fertilizer were constant regardless of the amount used per unit of land?
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