Suppose that the following production finetion is given: Q==D4KLFor the above production function, find the elasticity of substitution? Find the Retams to Scale.Using the above production funetion: find the labor demand and capital demand as functions of output(Q). price of labor (w) and price of capital (r). Does the Law of Demand hold for each inpur? Are these inputs normalor infenior inputs in the production process? Are inputs complements or substitutes? Why?Find the cost function for the above production finction. Verify the properties of the cost function.Suppose that a fim wants to produce 144 units of output and w-1, r-l. Find long run total cost.Suppose now that wage goes up to 4. Find the new long run total cost. Does fim substitute capital for labor? Whatis the percentage of cost saving relative to the case where firm is not able to substitute?Suppose that w=1, r-1 and a fimm has fixed amount of capital K 16 in short nun (SR). Find theshort run total cost, average total cost and marginal cost. What would be the short run total cost of producing 144units. Compare your answer with long nun total cost in part d. How and why are they different?

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Suppose that the following production fnction is given: Q-4KL For the above production function, find the elasticity of substitution? Find the Retuns to Scale.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.10P

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