A firm uses only two inputs to produce its output. These inputs are perfect substitutes. Is...
A firm uses only two inputs to produce its output. These inputs are perfect substitutes. Is it true that this firm must have the constant return to scale? If it is true, show the proof. If not, show a counter example.
Homework Answers
True
General form of perfect substitute preferences
Q = aL + bK
a,b : Constant
Then MRTS = MPL/MPK = a/b
Then for all t > 1
Q(tL, tK) = atL + btK
= t*(aL + bK)
Q(tL, tK) = t*Q(L,K)
so it exhibits CRS
Add Answer to:
A firm uses only two inputs to produce its output. These inputs
are perfect substitutes. Is...
If the inputs to a production process are perfect substitutes and the marginal rate of technical...
If the inputs to a production process are perfect substitutes and the marginal rate of technical substitution is equal to the ratio of the prices of the two inputs, the firm can choose from a virtually infinite array of combinations of the two inputs to minimize the costs of producing a given level of output. True False
A firm uses two inputs x1 and x2 to produce output y. The production function is...
A firm uses two inputs x1 and x2 to produce output y. The production function is f(x1, x2) = x11/2 + x21/2. The price of input 1 is 1 and the price of input 2 is 2. The price of output is 10. (d) Does this production function exhibit increasing, decreasing or constant returns to scale? (e) Solve the firm’s cost minimization problem. Derive the firm’s cost function c(y). (f) Find the profit-maximizing choice of inputs x1* and x2* and...
A firm uses two inputs x1 and x2 to produce output y. The production function is...
A firm uses two inputs x1 and x2 to produce
output y. The production function is given by f(x1, x2) = p
min{2x1, x2}. The price of input 1 is 1 and the price of input 2 is
2. The price of output is 10.
4. A firm uses two inputs 21 and 22 to produce output y. The production function is given by f(x1, x2) = V min{2x1, x2}. The price of input 1 is 1 and the price...
Suppose two inputs are perfect substitutes. In order to minimize production costs, the producer will simply...
Suppose two inputs are perfect substitutes. In order to minimize production costs, the producer will simply have to employ the cheapest input. a. True b. False
Assuming that the inputs a and b are perfect substitutes and MPa/Pa < MPb/Pb, the firm...
Assuming that the inputs a and b are perfect substitutes and MPa/Pa < MPb/Pb, the firm can attain optimal input combination by: (you may choose more than one answer) a) using more a and less b. b) using less a and more b. c) using only a. d) using only b. e) using both the inputs, a and b.
To produce output, a firm in the United States uses a series of inputs indexed by...
To produce output, a firm in the United States uses a series of inputs indexed by x, where x ranges from 0 to 1. These labels describe the "sophistication of an input, such that x=0 is the "least sophisticated" input, x=0.5 is the input of median sophistication, and x = 1 is the most sophisticated" input. To produce one unit of output, the US firm requires one unit of each input. There are two countries that can supply inputs, the...
Consider a cost-minimizing firm that uses two inputs x, and x, to produce output y from...
Consider a cost-minimizing firm that uses two inputs x, and x, to produce output y from the production function y=x"X, where a >0 and B>0. The competitive input prices of x, and x, are given respectively as w, and wz. a) Find the firm's demand functions for inputs x, and xz. b) Find the firm's total cost, average cost, and marginal cost functions. c) Show that if a +B>1 then average cost is always greater than marginal cost.
To produce output, a firm in the United States uses a series of inputs indexed by...
To produce output, a firm in the United States uses a series of inputs indexed by x, where x ranges from 0 to 1. These labels describe the "sophistication" of an input, such that x=0 is the least sophisticated" input, x = 0.5 is the input of median sophistication, and x = 1 is the most sophisticated" input. To produce one unit of output, the US firm requires one unit of each input. There are two countries that can supply...
A small firm uses inputs L & K to produce output Q, and the production function...
A small firm uses inputs L & K to produce output Q, and the production function is Q = K + 4L. The firm needs to produce exactly Q* output. The price of K is $2 and the price of L is $1. What is the firm’s total cost function TC(Q*)?
QUESTION 6 1 poin Production. A firm uses capital and labour to produce output according to...
QUESTION 6 1 poin Production. A firm uses capital and labour to produce output according to the following production function: q(KL)=KL. It pays $15 per hour for using capital and hires labour at $20 per hour. Select all that applies: a. The long run output expansion path for this firm is a straight line Marginal rate of technical substitution is given by MRTSu" SLK 2L O C. This production function exhibits constant return to scale. O d. Assume that the...
A firm uses two inputs x1 and x2 to produce
output y. The production function is given by f(x1, x2) = p
min{2x1, x2}. The price of input 1 is 1 and the price of input 2 is
2. The price of output is 10.
4. A firm uses two inputs 21 and 22 to produce output y. The production function is given by f(x1, x2) = V min{2x1, x2}. The price of input 1 is 1 and the price...
To produce output, a firm in the United States uses a series of inputs indexed by x, where x ranges from 0 to 1. These labels describe the "sophistication of an input, such that x=0 is the "least sophisticated" input, x=0.5 is the input of median sophistication, and x = 1 is the most sophisticated" input. To produce one unit of output, the US firm requires one unit of each input. There are two countries that can supply inputs, the...
Consider a cost-minimizing firm that uses two inputs x, and x, to produce output y from the production function y=x"X, where a >0 and B>0. The competitive input prices of x, and x, are given respectively as w, and wz. a) Find the firm's demand functions for inputs x, and xz. b) Find the firm's total cost, average cost, and marginal cost functions. c) Show that if a +B>1 then average cost is always greater than marginal cost.
To produce output, a firm in the United States uses a series of inputs indexed by x, where x ranges from 0 to 1. These labels describe the "sophistication" of an input, such that x=0 is the least sophisticated" input, x = 0.5 is the input of median sophistication, and x = 1 is the most sophisticated" input. To produce one unit of output, the US firm requires one unit of each input. There are two countries that can supply...
QUESTION 6 1 poin Production. A firm uses capital and labour to produce output according to the following production function: q(KL)=KL. It pays $15 per hour for using capital and hires labour at $20 per hour. Select all that applies: a. The long run output expansion path for this firm is a straight line Marginal rate of technical substitution is given by MRTSu" SLK 2L O C. This production function exhibits constant return to scale. O d. Assume that the...
Most questions answered within 3 hours.
-
Where is the error in this code sequence?
String s1 = "Hello";
String s2 = "ello";...
asked 10 months ago -
Financial data for Joel de Paris, Inc., for last year
follow:
Joel de Paris, Inc.
Balance...
asked 10 months ago -
Consider this reaction:
Al2(SO4)3 (aq)+ BaCl3
(aq) Al2Cl6 (aq)- +
3BaSO4(s) . What is the...
asked 10 months ago -
Suppose that Savneet is considering increasing her
recent random sample from 20 car rentals to 40...
asked 10 months ago -
Trucks arrive at an unloading terminal at an average rate of 120
per hour.
Trucks arrive...
asked 10 months ago -
Why are methanol and ethanol completely soluble in water while
octanol is not very little soluble....
asked 10 months ago -
A facilities manager at a university reads in a research report
that the mean amount of...
asked 10 months ago -
When the CuSO4 is rehydrated by adding water to the anhydrous
compound, is this an endothermic...
asked 10 months ago -
A ray of sunlight is passing from diamond into crown glass; the
angle of incidence is...
asked 10 months ago -
A block of mass 0.249 kg is placed on top of a light, vertical
spring of...
asked 10 months ago -
how do the kidneys compensate in the presences of acidosis
a) trigger hyperventilate
b) reserve acid...
asked 10 months ago -
Question 501 pts
The rental rate of capital to the firm increases. Which of the
following...
asked 10 months ago