Math  /  Algebra

QuestionTwo companies have production functions:
1) y1=2K+3Ly_{1}=2 K+3 L 2) y2=2K0.5L0.5y_{2}=2 K^{0.5} L^{0.5}
a) Find returns to scale for y1y_{1}. b) Calculate and analyze the marginal rate of technical substitution for y1y_{1}. c) Find returns to scale for y2y_{2}. d) Calculate and analyze the marginal rate of technical substitution for y2y_{2}.
Check if company 1 with 5L and 10K minimizes costs (w=2w=2, r=3r=3) and do the same for company 2 with 3L and 2K.

Studdy Solution
Question: The first company with the production function y1=2K+3Ly_{1}=2 K+3 L uses 5 units of labor and 10 units of capital. The cost of labor is w=2w=2 and the cost of capital is r=3r=3. Is the company behaving rationally, i.e., minimizing production costs?
A) Yes B) No C) It cannot be determined from the given information. D) The company is behaving rationally only if it is not making a profit.
Answer: B) No

View Full Solution - Free
Was this helpful?

Studdy solves anything!

banner

Start learning now

Download Studdy AI Tutor now. Learn with ease and get all help you need to be successful at school.

ParentsInfluencer programContactPolicyTerms
TwitterInstagramFacebookTikTokDiscord