Use the production function:Y=K^(3/4)*L^(3/4) to Show that marginal product is decreasing for both capital and labor(5pts),...
Use the production function:Y=K^(3/4)*L^(3/4) to Show that marginal product is decreasing for both capital and labor(5pts), yet there are increasing returns to scale(5pts).
Homework Answers
MPl=dY/dL = 3/4 K3/4 L3/4-1
MPl =3/4 K3/4 / L1/4
MPl and L are inversely related.
MPk=dY/dK = 3/4 L3/4 K3/4-1
MPk =3/4 L3/4 / K1/4
MPk and K are inversely related.
It means with an increase in input their marginal product decreases.
It is a Cobb Douglas production function. So, we can find out return of scale by adding powers of input in the production function.
SUm of powers = 3/4 + 3/4 = 1.5 Sum is more than 1 and hence it is increasing returns to scale means increase in the input will increase output at an increasing rate.
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Use the production function:Y=K^(3/4)*L^(3/4) to Show that
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