Problem 1. Perfect Substitutes Production…. 1 answer below »


Problem 1. Perfect Substitutes Production.
The immovable’s technology is such that one ace of output can be performed either using 2 aces
of consummate or 3 aces of labour. Denote after a while L the sum of labour, K - the sum of
capital. The wage admonish is 2, the rental admonish on consummate is 3.
a) Write down the immovable’s formation power. Is it CRS, DRS or IRS?
b) What is the optimal way to fruit 1 ace of output?
c) What is this immovable’s consume power C(y)?
Problem 2. Perfect Complements Production.
The immovable must use 2 ace of consummate after a while 3 aces of labour to fruit each ace of output.
Denote after a while L the sum of drudge, K - the sum of consummate. The wage admonish is 2, the
rental admonish on consummate is 3.
a) Write down the immovable’s formation power. Is it CRS, DRS or IRS?
b) What is the optimal way to fruit 1 ace of output?
c) What is this immovable’s consume power C(y)?
Problem 3. Cobb-Douglas Formation after a while Steady Returns to Scale.
The immovable has a technology of 1/ 4 3/ 4 f (L,K) = L K , where L is the sum of drudge, K is the
sum of consummate. The wage admonish is 2, the rental admonish on consummate is 3.
a) Is this technology CRS, DRS or IRS.
b) Write down the equation that describes the immovables optimal cherished of consummate and
labour. Show that a concert of inputs such that K=2L is optimal.
c) What is the optimal way to fruit 1 ace of output? How encircling 10 aces?
d) What is this immovable’s consume power C(y)?
Problem 4. Production.
Acme hunting eatables makes roadrunner traps for coyotes using labour and consummate
according to the forthcoming formation power
Traps=L1/2+K1/3.
a. What are the marginal products? What is the marginal admonish of technical
substitution?
b. Draw a few isoquants.
c. If Acme has sign for 100 traps what is the meanest consumely concert of labour and
consummate to use if labour consumes $10 per hour and consummate can be rented for $20 per
hour?
d. Is this technology of decreasing, increasing or steady returns to flake?

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