Labor Economics
7th Edition
ISBN: 9780078021886
Author: George J Borjas
Publisher: McGraw-Hill Education
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Question
Chapter 3, Problem 4P
(a)
To determine
Explain the effect of substitution effect in firm’s employment and capital change.
(b)
To determine
Explain the direction in which the scale effect changes the firm’s employment and capital stock.
(c)
To determine
Explain that preference of firm in the selection of labor and capital.
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Juan Valdez owns a coffee farm in Colombia. His production function is:
f(x1,x2)=(x1−1)^0.25 x2^0.5
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(c) Find Juan's cost function.
(d) What is the supply function of Juan's firm?
A firm has two variable factors and a productionfunction f(x1, x2) = 6x1/21X21/3. The price of its output is 3, the price of factor 1 is 3, and the priceof factor 2 is 2.– What is the optimal production output level?– What is the maximum profit-level?
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