Question

Suppose the production of electricity requires just two inputs, capital and labor, and that the production function is Cobb-Douglas. Now consider the isoquants corresponding to three different levels of output: Q = 100,000 kilowatt-hours, Q = 200,000 kilowatt-hours, and Q = 400,000

# Order the answer to: Suppose the production of electricity requires just two inputs, capital

# Order the answer to: What is the elasticity of substitution? What does it tell

Question

What is the elasticity of substitution? What does it tell us?

Subject

business-economics

# Order the answer to: Why would a firm that seeks to minimize its expenditures

Question

Why would a firm that seeks to minimize its expenditures on inputs not want to operate on the uneconomic portion of an isoquant?

Subject

business-economics

# Order the answer to: Could the isoquants corresponding to two different levels of output

Question

Could the isoquants corresponding to two different levels of output ever cross?

Subject

business-economics

# Order the answer to: Why must an isoquant be downward sloping when both labor

Question

Why must an isoquant be downward sloping when both labor and capital have positive marginal products?

Subject

business-economics

# Order the answer to: What is the difference between diminishing total returns to an

Question

What is the difference between diminishing total returns to an input and diminishing marginal returns to an input? Can a total product function exhibit diminishing marginal returns but not diminishing total returns?

Subject

business-economics

# Order the answer to: What is the difference between average product and marginal product?

Question

What is the difference between average product and marginal product? Can you sketch a total product function such that the average and marginal product functions coincide with each other?

Subject

business-economics

# Order the answer to: Suppose a total product function has the traditional shape shown

Question

Suppose a total product function has the “traditional shape” shown in Figure 6.2. Sketch the shape of the corresponding labor requirements function (with quantity of output on the horizontal axis and quantity of labor on the vertical axis).

Subject

business-economics

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# Order the answer to: Rick purchases two goods, food and clothing. He has a

Question

Rick purchases two goods, food and clothing. He has a diminishing marginal rate of substitution of food for clothing. Let x denote the amount of food consumed and y the amount of clothing. Suppose the price of food increases from Px1 to

# Order the answer to: David has a quasi-linear utility function of the form U(x,

Question

David has a quasi-linear utility function of the form U(x, y) = ?x + y, with associated marginal utility functions MUx = 1/(2?x) and MUy = 1.

a) Derive David’s demand curve for x as a function of the prices, Px