1 / 4

Problem 7.4 and 7.7

7.4 Suppose that the hourly output of chili at a barbecue (q, measured in pounds) is characterized by where K is the number of large pots used each hour and L is the number of worker hours employed. Graph the q=2,000 pounds per hour isoquant.

badrani
Download Presentation

Problem 7.4 and 7.7

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. 7.4 Suppose that the hourly output of chili at a barbecue (q, measured in pounds) is characterized by where K is the number of large pots used each hour and L is the number of worker hours employed. • Graph the q=2,000 pounds per hour isoquant. • The point K=100, L=100 is one point on the q=2,000 isoquant. What value of K corresponds to L=101 on that isoquant? What is the approximate value for the RTS at K=100, L=100? • The point K=25, L=400 also lies on the q=2,000 isoquant. If L=401, what must K be for this input combination to lie on the q=2,000 isoquant? What is the approximate value of the RTS at K=25, L=400? • For this production function, the RTS is RTS=K/L. Compare the results from applying this formula to those you calculated in part b and part c. To convince yourself further, perform a similar calculation for the point K=200, L=50.

  2. 7.7 The production function where , is called a Cobb-Douglas production function. This function is widely used in economic research. Using the function, show that • The chili production in problem 7.4 is a special case of the Cobb-Douglas. • If , a doubling of K and L will double q. • If , a doubling of K and L will less than double q. • If , a doubling of K and L will more than double q. • Using the results from part b through part d, what can you say about the returns to scale exhibited by the Cobb-Douglas function?

More Related