Question

econometric estimates of the production of raspberries results in r=k0,4(l)0,6 where r represents the number of gallons of raspberries picked, k the number of raspberry picking machines being used, and l the number of worker employed

Question 3 [3 marks) Econometric estimates of the production of raspberries results in R = K04 (L) 0.6 where R represents the number of gallons of raspberries picked, K the number of raspberry- picking machines being used, and L the number of workers employed. Using this production function, answer the following questions: A.Does this production function exhibit increasing, decreasing or constant returns to scale? B.What is the equilibrium rental rate of capital paid to raspberry machine owners?

Answer 1

0.6 a R=kora Increase beeth K and L by of times then , R(KX, LA) = (kx) 0:4 (LA) OG = 10.4+06 koln Lor so, R follows constant returns to scale by At equin MRTS = wo w a warna rate ] MRTS I w = wonge rate ? 1 pa rental rate on 0.6L014 kolu o 0.4 Loot k-0.6 ar 15.- on bok = 101.5L put this k vatie - WLtok we will e wht m. (w) SL put to an L=1k. ( ) put this chan Lin producten tend R = k014 (2166 0.6 0 gols = k ob 0.78 | ook = R. (wjob I = R1 00 1127 and share of amenus of rapsbury owenen = r.k - r. R ot 1.27 R pl wwjob 1.27 02 e pik - R