A firm has the production function Q(L, K) = √K + 2√L. The price of one unit of capital is R > 0, and the price of one unit of labor is W > 0. Which of the following statements is correct? O The production function can be represented by a CES production function [aLº + bK²] for suitable values of a, b and p. The marginal rate of technical substitution is MRT Suk (L, K) = = 2√L √K O If W = R, the fi rm's demand for labor is four times the demand for capital. O The production function has increasing returns to scale.
A firm has the production function Q(L, K) = √K + 2√L. The price of one unit of capital is R > 0, and the price of one unit of labor is W > 0. Which of the following statements is correct? O The production function can be represented by a CES production function [aLº + bK²] for suitable values of a, b and p. The marginal rate of technical substitution is MRT Suk (L, K) = = 2√L √K O If W = R, the fi rm's demand for labor is four times the demand for capital. O The production function has increasing returns to scale.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter7: Production Economics
Section: Chapter Questions
Problem 5E
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![A firm has the production function Q(L, K) = √K + 2√L. The price of one unit of capital is R > 0,
and the price of one unit of labor is W > 0. Which of the following statements is correct?
The production function can be represented by a CES production function [aLº +6K²] for suitable values of
b and p.
a₂
The marginal rate of technical substitution is MRT Sık (L, K):
2√L
√K
O If W = R, the fi rm's demand for labor is four times the demand for capital.
O The production function has increasing returns to scale.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fa958086a-512a-4f04-bd60-3025fca1576f%2F962c253a-4a6f-43c1-9237-869911c9e6bf%2Ffbm1zb8_processed.png&w=3840&q=75)
Transcribed Image Text:A firm has the production function Q(L, K) = √K + 2√L. The price of one unit of capital is R > 0,
and the price of one unit of labor is W > 0. Which of the following statements is correct?
The production function can be represented by a CES production function [aLº +6K²] for suitable values of
b and p.
a₂
The marginal rate of technical substitution is MRT Sık (L, K):
2√L
√K
O If W = R, the fi rm's demand for labor is four times the demand for capital.
O The production function has increasing returns to scale.
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Step 1: Determine the given information:
VIEWStep 2: Determine MRS of given production function:
VIEWStep 3: Determine the elasticity of substation of given production function:
VIEWStep 4: Determine the labor and capital ratio when price of inputs is 1:
VIEWStep 5: Determine return to scale of given production function:
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