1. Draw the isoquants at q = 1, q=5 and q = 10 and comment on the input substituability and returns to scale for the fol

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1 Draw The Isoquants At Q 1 Q 5 And Q 10 And Comment On The Input Substituability And Returns To Scale For The Fol 1 (56.81 KiB) Viewed 41 times

1. Draw the isoquants at q = 1, q=5 and q = 10 and comment on the input substituability and returns to scale for the following production functions: 1. F(K, L) = K + 0.5L 2. F(K, L) = min{2K, L} 3. F(K, L)= 2KL 4. F(K, L) = 2√KL Remember to include axis labels, a name for your graph and a legend indicating which curve represents which quantity. Do one graph for each production function, indicating in the same graph different levels of output. II. Assume a firm production technology is represented by the production function F(K, L) AKto (1-a) where K represents capital (for example money spent in machines), L represents labor (for example total hours worked by the firm's workers), and A>0, t>0 and a € [0, 1], are parameters. The firm can buy/hire inputs in a competitive market where r is the price of capital and w the price of labor. Answer the following: 1. Which parameter determines the returns to scale of this production function? For which values of that parameter the production function exhibits: a) Increasing returns to scale b) Constant returns to scale c) Decreasing returns to scale 2. Determine the optimal ratio of capital to labor in the long run. What parameter determines this ratio? 3. Determine the minimum cost function in the long run. What represents the parameter that is left from (1) and (2)?