transformation of a utility function represents the same preference, hence the spacing between indifference curves does not have any significance. Explain why in the theory of producer, the production function and the corresponding isoquant is a cardinal property, that is, the
Q: Suppose that we have a linear production function Q = 10L + 2K. (Quantity = labor + capital) If the…
A: We are going to find Marginal Rate of Technical Substitution to answer this question. Always…
Q: Decreasing rate of marginal substitution between two inputs occur when the input being added replace…
A: MRTS or marginal rate of substitution refers to the rate at which one input is substituted for other…
Q: What is the marginal rate of substitution at point A? Interpret this value.
A: Formula used: MRSXY = dYdX = MUxMUy
Q: What is marginal rate of technical substitution?
A: The substitution is the process of replacing one item with another item which will have the same…
Q: Briefly explain and graphically illustrate the property of diminishing margincal rate of…
A: The willingness of a consumer to substitute one good for another as long as the new good is equally…
Q: a) ChrisNaan Company produces fruit smoothies for students at the University of GhAna. Supp its…
A: production function gives the technological relation between quantities of physical inputs and…
Q: Supposing that a single consumer works for a firm, the quantity of labor input for the firm, N, is…
A:
Q: Suppose that the production function is given by y = 2x0.5 The price of x is $3 and the price of y…
A: The production function shows the mathematical relation between the input used to produce given…
Q: Consider a firm that produces output using a typical production function as discussed in the course,…
A: A Cobb-Douglas production function model is often defined as a connection between production yield…
Q: In the Heckscher-Ohlin (H-O) model, Explain with the help of a graph the effect of an increase in…
A: A relative price is described as the P {"price"} of a service or a commodity that measured in…
Q: Assume that there are 2 input combinations in the isoquant: point A (at K=20, L-10), and point B (at…
A: Isoquant curves are defiend as the locus of all the points with equal level of production.Some…
Q: If the economy uses inputs efficiently, then (pls select all that applies) Group of answer choices…
A: The marginal rate of technical substitution is the rate at which the utility of one input is…
Q: The combinations of inputs that produce a given level of output are depicted by isoquants. In…
A: MRTS = MPL /MPK MPL= dQ/dL ie the first order partial differentiation with respect to L =…
Q: The marginal rate of technical substitution is: The rate at which a producer is able to exchange,…
A: A marginal rate of technical substitution is a rate at which one input is decreased in order to…
Q: Suppose life expectancy in years (L) is a function of two inputs, health expenditures (H) and…
A: The marginal product of a business is the additional output created as a result of additional input…
Q: With the help of a diagram, make a distinction between substitution effect and income effect on…
A: Income Effect versus Substitution Effect: An Overview The income effect communicates the effect of…
Q: Discuss the marginal rate of substitution and its role in the production function.
A: In economics, there are different terms used to explain a specfiic economic concept based on market…
Q: The marginal rate of technical substitution represents the slope of?
A: If there is two input goods x and y used in the production process, then the marginal rate of…
Q: Consider a worker whose choice is between hours of free time and consumption. His company has now…
A: Labour- leisure curve is a backward bending curve that shows that with an increase in wage the…
Q: What is the concept map of the Law of Diminishing Returns to a Factor?
A: The law of diminishing returns explains that if one input in the production of a commodity is…
Q: Explain why a researcher may choose to use Roy’s Identity to derive estimable labour supply…
A: The work-leisure ratio is the most significant economic factor of labor supply. Leisure is a natural…
Q: Joe owns a small coffee shop. His production function is q = 2K0.5 L where q is the number of cups…
A: Answer - Given in the question- Joe owns a small coffee shop. His production function is q = 2K0.5 L…
Q: Explain the fact that typical person employed in production worked 55 hours per week in 1900, 40…
A: The labor supply curve is backward bending which means it is positively sloped to a certain level of…
Q: The marginal rate of technical substitution is
A: The substitution is the process of replacing one item with another item which will have the same…
Q: Suppose the price of labor used by a cost-minimizing firm decreases. The firm responds to the price…
A: A cost minimizing firm decides it’s inputs by comparing the marginal-product of its inputs. Cost…
Q: The degree of convexity of an isoquant determines the degree of substitutability of factors of…
A: Answer: An isoquant shows the locus of two factors that yield the same level of output on an…
Q: Consider a general Cobb-Douglas production function q= LK, and assume the firm produces q-qo. Which…
A: Ans. Correct answer is option - (c) if we arrange the options a, b, c , d, e from above. We can say…
Q: Address the following hypothetical scenario: Suppose that hypothetical major league baseball player,…
A: The correct answer is given in the second step .
Q: David Ricardo ([1817] 1965) modified Smith’s model by introducing diminishing returns to land…
A: 1. David Ricardo’s theory of economic development assumes the following: - There exists a market…
Q: Consider a firm for which production depends on two normal inputs, labor and capital, with prices w…
A: An iso cost curve shows the different combinations of factor inputs that have constant market cost.…
Q: Suppose the production function of a firm is given as: Q = 5L + 10L2 – 2L3 Find the number of labors…
A: Given production function Q = 5L + 10L2 -2L3 This is also referred as Total Product Average Product…
Q: Consider a Cobb-Douglas production function: f(l, k) = Alα k1−α , where A is the total factor of…
A: Since you have provided multiple parts and multiple subpart question, we will solve the first three…
Q: a) Draw isoquant curves for an economic consulting firm that can always trade two mathematicians for…
A: Dear student, you have asked multiple questions in a single post. In such a case, I will be…
Q: production function of this nature; AX1aX2b determine the Marginal Rate of Technical Substitution.
A: Marginal rate of technical substitution means the rate at which one factor is substitute by other…
Q: The Implicit Function Theorem and the Marginal Rate of Substitution. An important result from…
A: In math, all the more explicitly in multivariable analytics, the implicit function theorem is a…
Q: There is no difference between the law of diminishing marginal returns and the law of diminishing…
A: Answer: The given statement is false. Explanation: Law of diminishing marginal returns: When a…
Q: Below are three examples of an individual experiencing a wage change at various points in their…
A: Employees will increase their working hours when they get an increment in their wages as well. There…
Q: True or False 1. If leisure and consumption are normal goods, th labor supply curve is more likely…
A: The normal good refers to good which is positively related to the income level. Or rise in income…
Q: For each of the following cases, determine whether the firm should (A) Use more labor and less…
A: We will answer the first three questions only. Please resubmit the question mentioning any other…
Q: Given the production function: Where CES stands for Constant Elasticity of Substitution. K is…
A: We are going to find the Profit function and First order conditions to answer the question.
Q: The figure shows the production function of a farmer who produces grain by working certain hours…
A: Production function shows the relationship between input and output. Increase in hours worked…
Q: Relate the concept of marginal rate of substitution back to the idea of willingness to pay and…
A: Solving questions with graph
Q: slope of the line connecting the origin to point A is _______ (options: steeper, flatter) than the…
A: Production possibility curve is the curve showing combination of two goods that can be produced with…
Q: Given the production function Q(K,L) = 96K^0.3L^0.7, find the MPK (i.e. Marginal Product of Capital)…
A: MPL is the extra output generated per additional dollar or rupees spent on labour MPK is the…
In the theory of consumer, we argued that the utility is ordinal, that is, utility number does not have any intrinsic meaning other than to give a preference ordering among consumption bundles. In other words, any increasing monotone
transformation of a utility function represents the same preference, hence the
spacing between indifference
Explain why in the theory of producer, the production function and the
corresponding isoquant is a cardinal property, that is, the number itself has an
intrinsic meaning. And explain the relationship between returns to scale and space between isoquants.
Step by step
Solved in 2 steps
- Suppose that the cost of living increases, thereby reducing the purchasing power of your income. If your money wage doesn’t increase, you may work more hours because of this cost-of-living increase. Is this response predominantly an income effect or a substitution effect? Explain.According to The Wall Street Journal, Mitsubishi Motors recently announced a major restructuring plan in an attempt to reverse declining global sales. Suppose that as part of the restructuring plan Mitsubishi conducts an analysis of how labor and capital are used in its production process. Prior to restructuring Mitsubishi’s marginal rate of technical substitution is 0.12 (in absolute value). To hire workers, suppose that Mitsubishi must pay the competitive hourly wage of ¥1,800. In the study of its production process and markets where capital is procured, suppose that Mitsubishi determines that its marginal productivity of capital is 0.8 small cars per hour at its new targeted level of output and that capital is procured in a highly competitive market. The same study indicates that the average selling price of Mitsubishi’s smallest car is ¥1,200,000. Determine the rate at which Mitsubishi can rent capital and the marginal productivity of labor at its new targeted level of output. To…According to the Wall Street Journal, Mitsubishi Motors recently announced a major restructuring plan in an attempt to reverse declining global sales. Suppose that as part of the restructuring planMitsubishi conducts an analysis of how labour and capital are used in its production process. Prior to restructuring Mitsubishi’s marginal rate of technical substitution is 0.15 ( in absolute value). To hire workers. Suppose that Mitsubishi must pay the competitive hourly wage of US$ 15. In thestudy of production process and markets where capital is procured, suppose that Mitsubishi determine that its marginal productivity of capital is 0.5 small cars per hour at its new targeted level of output and that capital is procured in a highly competitive market. The same study indicates that the average selling price of Mitsubishi’s smallest car is US$ 9500. Determine the rate at which Mitsubishi can rent capital and marginal productivity of labour at its new targeted level of output. To minimize…
- A college football coach says that given any two linemen A and B, he always prefers the one who is bigger and faster. Is this preference relation transitive? Is it complete? The production function for puffed rice is given by q , where q is the number of boxes produced per hour, K is the number of puffing guns used each hour, and L is the number of workers hired each hour. Calculate the q = 1,000 isoquant for this production function and show it on a graph. If K = 10, how many workers are required to produce q = 1,000? What is the average productivity of puffed-rice workers? Suppose technical progress shifts the production function to , answer parts a and b for this new situation.Consider a firm for which production depends on two normal inputs, labor and capital, with prices w and r, respectively. Initially the firm faces market prices of w = 6 and r = 4. These prices then shift to w = 4 and r = 2.a. In which direction will the substitution effect change the firm’s employment and capital s tock?b. In which direction will the scale effect change the firm’s employment and capital stock?c. Can we say conclusively whether the firm will use more or less labor? More or less c apital?How does the curvature of an isoquant relate to the marginal rate of technical substitution along an isoquant?
- Briefly explain and graphically illustrate the property of diminishing margincal rate of substitution and its relation to marginal utilities.How does a consumer’s optimal choice of goods change if all prices and the consumer’s income double? (Hint: focus on the budget constraint. You don’t have to, but you can use an example to support your answer).5. Output is produced according to a production process given by: Q = 4LK, where L is the quantity of labor input and K is the quantity of capital input. If the price of K is $10 and the price of L is $5, then what is the cost-minimizing combination of K and L capable of producing 32 units of output?Briefly explain and graphically illustrate the property of diminishing marginal rate of technical substitution and its relation to marginal productivities.
- Suppose the price of labor used by a cost-minimizing firm decreases. The firm responds to the price change by changing its demands for certain inputs, but keeps its output constant. What happens to the firm’s use of labor? What happens to the firm’s production costs? Graphically show the new optimal bundle and associated isocost curve on the graph below.Suppose a person can work up to 80 hours per week at a pre-tax wage of $20 per hour but faces a constant 20% payroll tax. Assume that under these conditions the person maximizes utility by choosing to work 50 hours each week. The government proposes a negative income tax so that everyone receives $300 per week regardless of how much they work. To pay for the negative income tax, the payroll tax would be increased to 50%. Using the labor-leisure model, graphically show whether a person would be better off if the negative income tax is adopted and indicate whether hours worked increases or decreases due to the policy.If the economy uses inputs efficiently, then (pls select all that applies) Group of answer choices a) MRTS = 1. b) MRTS must be equal to the slope of a firm’s isoquant curve. c) the ratio of input marginal products must be equal to the ratio of input prices. d) the quantity of one output cannot be increased without decreasing the quantity of the other. e) every firm’s MRTS is equal to every consumer’s MRS. f) every firm’s MRTS is equal to the ratio of input prices. g) MRTS = MRT. h) outputs are on PP