False.
If the value of elasticity of substituion is less, it means, a change in relative factor prices, leads to a less than proportionate change in the factor inputs. Hence to increase K/L by a large amount, w/r will have to be increased by an even larger amount.
A low elasticity of substition between k and L means that relative prices of capital and...
3. What is the scale elasticity of F(K,L) K22L, where K denotes capital and L denotes labor? What relationship between capital and labor must hold for scale elasticity to equal one?
Consider the Leontief production function F(KL) = min {K,L], where capital K and labor L have respective positive input prices r and w. (a) Why is it that the cost-minimizing firm sets K 5. L? (b) What is the cost function? (c) How would your answer to part (b) change, if at all, if rw 0? Explain.
SM 3. A firm uses capital K, labour L, and land T to produce units of a commodity, where Q=K2/3+ 1/2+/3 Suppose that the firm is paid a positive price p for each unit it produces, and that the positive prices it pays per unit of capital, labour, and land are r, w, and q, respectively. (a) Express the firm's profits as a function of (K,L,T). Then, find the values of K, L, and T, as functions of the four...
consider an industry that uses capital, K and labor, L to produce output, X, according to a Cobb-Douglas production function: x=K L where 0 <X<1 is the share parameter for capital and 0<B,1 is the share parameter for labor. Denote the rental price of capital by r and the wage by w. Determine the capital to labor ratio (K/L) wh9ich minimizes the cost of producing a fixed amount of output, X. Under what conditions does optimal ratio of capital to...
(Figure: Capital and Labor IV) Which of the following statements is (are) TRUE? Capital (K) 15 12 9 6 3 to-11 0 3 4 5 6 7 8 9 10 Labor (L) The MRTS.x at point A equals MPx/MP The MRTS x at point B is greater than MRTS.x at point A. It is easier for a small amount of additional labor to replace a large amount of capital at point A than at point B. It is easier for...
Let us assume a 2x2x2 model (country H & F, good A & B, factors L & K). The two countries are identical except L < L* and K > K* More over good A is labor intensive and good B is capital intensive. (a) Draw the production possibility frontier of the two countries. (You need to measure A on the horizontal axis). (b) Using factor prices w & r, commodity prices Pa & Pb, derive the relation between the...
If Q is total real output, K is capital in use, L is labor employed, an increase in the productivity of labor would imply a(n):? increase in Q/L.? increase in L/K.? decrease in (Q + K)/L.? decrease in Q/K.? ?increase in K/L. Which of the following is true of the agricultural sector in developing countries?? ?It causes a rapid growth in the economy's national income. ?It relies heavily on technology. ?A very small percentage of labor force is employed in...
ASSIGNMENT 2 (a) Distinguish between absolute and relative poverty. (b) Explain how low human capital is both a cause and consequence of poverty. Explain how an increase in unemployment increases poverty in a country. (d) For two countries of your choice, research unemployment figures since 2008 and election results. Do you see a pattern? (e) In a cause and effect chain reaction, explain how income growth is both a cause of poverty and a solution to reduce poverty.
Question#1: Based on the aggregate production function: GDP = FT (L, K, H) a. Imagine that the amount of capital K increases by 10% (from 50 to 55 units) while labour and technology stay the same. How much does total GDP and GDP per worker change by? (A specific percentage is not needed, just ‘more than’ / ‘less than’ 10%.) b. Imagine that capital increases by 5 units again, from 55 to 60. How big is the resulting change in...
1. Consider the following production function: Q = f(K, L) = (K^1/2) (L^1/2) a) Place capital on the vertical axis and labor on the horizontal axis. Determine the marginal rate of technical substitution. b) Suppose that the price of capital is $10, 000, and the price of labor is $10, 000. What is the ratio of capital to labor that allows the firm to produce any given quantity of output as cheaply as possible. c) Suppose that the price of...