EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Question
Chapter 13, Problem 4RQ
To determine
To explain:Profit maximizing assumption is used in explaining the direction of substitution and output effect.
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Students have asked these similar questions
For each of the following cases, determine whether the firm should
(A) Use more labor and less capital, or
(B) Use more capital and less labor.
1. The marginal rate of technical substitution is 2 (i.e., the marginal product of labor is twice the
marginal product of capital) and the input price ratio is 3 (i.e., a unit of labor costs three times as much
as a unit of capital)
2. The marginal rate of technical substitution is 2 (i.e., the marginal product of labor is twice the
marginal product of capital) and the input price ratio is 1 (i.e., a unit of labor costs the same as a unit of
capital)
3. The marginal rate of technical substitution is initially equal to the input price ratio, but the firm's
machines depreciate, so that the marginal product of capital decreases.
4. The marginal rate of technical substitution is initially equal to the input price ratio, but the firm
successfully negotiates a lower rate of rent for their machines, so that the price of capital decreases.
5. The…
Question 2: Elasticity of Substitution
Show that the production function f (x1,x2) = a ln x, + ß In x, has elasticity of substitution equal
to one.
a) Find the marginal rate of technical substitution MRTS,2, express it in terms of a ratio of x2
to x1, call this r =
X1
b) Take logs on both sides,
c) Find the derivative of In MRTS12 with respect to In r. The inverse of this quantity is the
elasticity of substitution.
Suppose that a firm can not give up one input in an exchange for the other and still maintain the same level of output. Calculate the elasticity of substitution in this case and elaborate on your answer.
Chapter 13 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 13.1 - Prob. 1MQCh. 13.1 - Prob. 2MQCh. 13.2 - Prob. 1TTACh. 13.2 - Prob. 2TTACh. 13.3 - Prob. 1MQCh. 13.3 - Prob. 2MQCh. 13.5 - Prob. 1MQCh. 13.6 - Prob. 1MQCh. 13.6 - Prob. 1TTACh. 13.6 - Prob. 2TTA
Ch. 13.6 - Prob. 1.1TTACh. 13.6 - Prob. 2.1TTACh. 13 - Prob. 1RQCh. 13 - Prob. 2RQCh. 13 - Prob. 3RQCh. 13 - Prob. 4RQCh. 13 - Prob. 5RQCh. 13 - Prob. 6RQCh. 13 - Prob. 7RQCh. 13 - Prob. 8RQCh. 13 - Prob. 9RQCh. 13 - Prob. 10RQCh. 13 - Prob. 13.1PCh. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Prob. 13.6PCh. 13 - Prob. 13.7PCh. 13 - Prob. 13.8PCh. 13 - Prob. 13.9PCh. 13 - Prob. 13.10P
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