Microeconomics (9th Edition) (Pearson Series in Economics)
9th Edition
ISBN: 9780134184241
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Chapter 6, Problem 6E
To determine
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Distinguish between the Marginal Rate of Technical Substitution and Elasticity of Substitution in production
Bulldog, Inc. measures the technical rate of substitution at ???/??? = 3. The prices of labor and capital faced by Bulldog are such that currently ??/?? = 4. Is Bulldog producing its current level of output at the minimum cost? If not, how could they do better? Very briefly explain your answer.
U = 5x1
1/2
+2x2. What is the marginal rate of substitution at (1, 4)? Round your answer to two decimal places.
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Chapter 6 Solutions
Microeconomics (9th Edition) (Pearson Series in Economics)
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- Answer the following questions clearly in computer-typed print with Make sure you label your graphs . Question 1: In the long-run with strictly convex isoquants. If the relative price of labor (?/?)⁄ exceeds the marginal rate of technical substitution (???/???⁄). What changes should happen to the input mix? Explain your answer.arrow_forwardSuppose a production function is given by the equation Q = LVK. 1. Graph the isoquants corresponding to Q = 10, and Q = 20. 2. MP = √K and MP = 0.5(L/VK). Find the Marginal Rate of Technical Substitution LK (MRTSLK). Do these isoquants exhibit diminishing marginal rates of technical substitution? (Does the slope get flatter as L increases?) 3. The cost of labor is w = $5 per labor hour and the cost of capital is r = $15 per machine hour. What is the equation of the $1500 iso-cost curve?arrow_forwardPlease answer only # 4 and 5arrow_forward
- Can you please check my answers for the following question? Mandy owns a small coffee shop. Her production function is q=2K0.5L where q is the number of cups of coffee produces, K is the number of coffee machines, and L is the number of employees. If K=10 and L=20, the marginal rate of technical substitution is: 1 MLP= 2K0.5 MLK = L/K0.5 MRTS= 2K/L = 2(10)/20 =1 MRTS = w/r Starting from 10 machines and 20 employees, if Joe hires one more employee, then he can use ______ fewer machine(s) and still produce the same quantity of coffee. 1 fewer machinearrow_forwardLesson 7- Production Question 1arrow_forwardSuppose that a firm’s production function is q =10L0.5K0.5 (i.e. q = 10√L√K). The cost of a unit of labour is €20 and the cost of a unit of capital is €80. The firm wants to produce 80 units of output. The marginal rate of technical substitution is K/L The optimal level of labour required to produce 80 units of output is A. 16 B. 8 C. 4 D. 2arrow_forward
- Suppose that the production of a certain product only requires one input, labor, and that the additional production diminishes by half after the last input. On the other hand, the demand of the good can be described using the equation Q = 10000 – P/10. The total product of the second unit of labor is 3,000 unite. Finally, each additional worker requires P1,000,000. Given the following information, answer the following questions: What is the marginal revenue product of the third unit of labor? Answer: 500 How would you characterize the marginal revenue product of labor? How would you characterize the labor market that this firm faces?arrow_forwardQ6arrow_forwardPrunella raises peaches. She uses L units of labor, and T units of land to produce peaches. Her production function is f(L, T)= L1/2T 1/2 A: Write the equation and plot the isoquant for the output quantity 4. B: What is the returns to scale of this production function? C: Find the marginal products of labor and land. What is the rate of technical substitution between land and labor? D: In the short-run, Prunella cannot vary the amount of land she uses. Plot the output as a function of labor only for the fixed level of land of T=1. E: Find the marginal product of labor from L=4 and show it on the graph. Is the marginal product of labor diminishing, constant or increasing in labor? F: Suppose wages are constant and equal w, fixed costs are zero. Find the short-run profit maximizing level of labor for T=1. Please see the attached photoarrow_forward
- What is the production function if labor, L, and capital, K, are perfect substitutes and each unit of q requires 0.2 units of L or 0.2 units of K (or a combination of these inputs that adds to 0.2)? The production function is es Get more help - q= Clear all Check answerarrow_forwardFlorida citrus growers say that the recent crackdown on illegal immigration is increasing the market wage rates necessary to get their oranges picked. Some are turning to $100,000 to $300,000 mechanical harvesting machines known as “trunk, shake, and catch” pickers, which vigorously shake oranges from the trees. If widely adopted, how will this substitution affect the demand for human orange pickers? What does that imply about the relative strengths of the substitution and output effects?arrow_forwardJoe owns a small coffee shop. His production function is q = 2K0.5 L where q is the number of cups of coffee produces, K is the number of coffee machines, and L is the number of employees. a) If K=1 and L=2, the marginal rate of technical substitution is _________. b) If, starting from 1 machine and 2 employees, Joe hires one more employee, then he can produce the same quantity of cups of coffee with _________ less machines.arrow_forward
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