Suppose over time that a firm's production process undergoes capital-saving technological progress. This implies (1) the isoquants corresponding to any particular level of output will shift outward from the origin and the MRTSL,K along any ray from the origin will increase. (2) the isoquants corresponding to any particular level of output will shift outward from the origin and the MRTSL,K along any ray from the origin will decrease. (3) the isoquants corresponding to any particular level of output will shift inward toward the origin and the MRTSL,K along any ray from the origin will increase. (4) the isoquants corresponding to any particular level of output will shift inward toward the origin and the MRTSL,K along any ray from the origin will decrease. When a production function can be expressed as q = min{ak, bL}, the relationship between capital and labour in the production function is that (1) capital and labour are perfect substitutes, and the isoquants are linear. (2) capital and labour must be combined in fixed proportions, and the isoquants are L- shaped. (3) capital and labour are easily substituted, and the isoquants are convex to the origin. (4) capital and labour are perfect substitutes, and the isoquants are L-shaped.
Suppose over time that a firm's production process undergoes capital-saving technological progress. This implies (1) the isoquants corresponding to any particular level of output will shift outward from the origin and the MRTSL,K along any ray from the origin will increase. (2) the isoquants corresponding to any particular level of output will shift outward from the origin and the MRTSL,K along any ray from the origin will decrease. (3) the isoquants corresponding to any particular level of output will shift inward toward the origin and the MRTSL,K along any ray from the origin will increase. (4) the isoquants corresponding to any particular level of output will shift inward toward the origin and the MRTSL,K along any ray from the origin will decrease. When a production function can be expressed as q = min{ak, bL}, the relationship between capital and labour in the production function is that (1) capital and labour are perfect substitutes, and the isoquants are linear. (2) capital and labour must be combined in fixed proportions, and the isoquants are L- shaped. (3) capital and labour are easily substituted, and the isoquants are convex to the origin. (4) capital and labour are perfect substitutes, and the isoquants are L-shaped.
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.2P
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