ECON 2350 Lecture Notes - Lecture 6: Linear Technology, Isoquant, Production Function

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limegerbil648

6 Mar 2017

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Document Summary

Cobb douglas type" y = lak b ( = 1 ) Perfect complements" or leontief technology y = min(al, bk) ( = 0) Perfect substitutes" or linear technology y = al + bk ( = ) Fk ak bl and here dt rs dl. Isoquants are strictly convex to the origin. Intuition about t rs and diminishing t rs. Profit maximization (input formulation): general formulation: max. = pf (l, k) wl rk: purpose: to find and characterize the input demand functions, the. Supply function of the rm, and rm welfare (maximum pro t): calculus solution method (general method; applicable to di erentiable functions): First order conditions (f. o. c. ) pfl(l, k) = w (1) (2) Second order conditions(su cient): fll < 0 and fllfkk . Lk > 0. (satis ed in cd case if a + b < 1. ) pfk(l, k) = r: pro t max. implies cost minimization condition (from (1) and (2) we get)

Related Questions

The law of eventually diminishing marginal returns: (Points : 1)

a. states that each and every increase in the amount of the variable factor employed in the production process will yield diminishing marginal returns.
b. is a mathematical theorem that can be logically proved or disproved
c. is the rate at which one input may be substituted for another input in the production process
d. None of the above

The marginal product is defined as: (Points : 1)

a. the ratio of total output to the amount of the variable input used in producing the output
b. the incremental change in total output that can be produced by the use of one more unit of the variable input in the production process
c. the percentage change in output resulting from a given percentage change in the amount of the variable input X employed in the production process with Y
d. None of the above

The rate at which one input X may be substituted for another input Y in a production process, while total output remains constant, is: (Points : 1)

a. the slope of the isoquant curve
b. the marginal rate of technical substitution

c. equal to MPx/MPy

d. all of the above
e. none of the above

Marginal revenue product is: (Points : 1)

a. defined as the amount that an additional unit of the variable input adds to the total revenue
b. equal to the marginal factor cost of the variable factor times the marginal revenue resulting from the increase in output obtained
c. equal to the marginal product of the variable factor times the marginal product resulting from the increase in output obtained
d. a and b
e. a and c

Marginal factor cost is defined as the amount that an additional unit of the variable unit of the variable input adds to ____________. (Points : 1)

a. marginal cost
b. variable cost
c. marginal rate of technical substitution
d. total cost
e. none of the above

In the Cobb-Douglas production function Q=aL^?1.K^?2 ______________. (Points : 1)

a. the marginal product of labor (L) is equal to ?1
b. the average product of labor (L) is equal to ?2
c. if the amount of labor input (L) is increased by 1 percent, then output will increase by ?1 percent
d. a and b
e. a and c