Suppose capital and labor are perfect complements in production.For output levels between 0 and 100, 2 units of labor together with 1 unit of capital produce 1 unit of output; for output levels between 100 and 200, 1 unit of labor together with 1 unit of capital produces 1 unit of output; and for output levels above 200, 1 unit of labor together with two units of capital produces one additional output.In each graph below, carefully label as much of each graph as you can.
a.On a graph with labor on the horizontal axis and capital on the vertical, illustrate isoquants for 100, 200 and 300 units of output.
b.Is this production technology homothetic?
c.Suppose the wage and rental rates are 10.On a graph with output on the horizontal axis and dollars on the vertical, plot the total (long run) cost of producing 100, 200 and 300 units of output and illustrate the total cost curve.
d.On a separate graph with output on the horizontal and dollars on the vertical axis, illustrate the (long run) marginal cost curve and the approximate shape of the long run average cost curve.
Correct Answer:
Verified
View Answer
Unlock this answer now
Get Access to more Verified Answers free of charge
Q22: We have worked a lot with homothetic
Q23: Suppose there are different ways of producing
Q24: Cobb-Douglas production function have decreasing returns to
Q25: Conditional input demands are homogeneous of degree
Q26: Suppose that you are given a cost
Q28: Profit functions are homogeneous of degree zero.
Q29: A price taking firm employs each of
Q30: Consider a firm that uses labor and
Q31: Cost functions must be homogeneous of degree
Q32: In considering "returns to scale" we assume
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents