ZuoTi.Pro
Question

Use an example to explain a production situation in which labor and capital must be in...

Use an example to explain a production situation in which labor and capital must be in fixed proportion (your example needs to identify the product, specify the capital/labor ratio, draw an isoquant map, and then use the isoquant map to explain). Also, what is the RTS? (rts=return to scale) Why?

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

An example is a Leontief production function which requires labor and capital in a 1:1 ratio:

The example for the product can be a wheat which requires one unit of land and one unit of labor for production of one unit. Plotting an isoquant map:

The return to scale is the increase in output caused by an increase in all factors in a fixed ratio. In this case, returns to output is constant as output increases in the same proportion as all factors.

0 0
Add a comment
Know the answer?
Add Answer to:
Use an example to explain a production situation in which labor and capital must be in...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Suppose a firm can use either Capital (K) or Labor (L) in a production process. The...

    Suppose a firm can use either Capital (K) or Labor (L) in a production process. The firms Production function is given by Q = 5L + 15K. The price of Capital is $20 per unit and the price of Labor is $8 per unit. a) (4 points) What is the firm’s Total Cost function? TC(Q) = ____________________________ b) (8 points) Suppose the firm is producing 30 units of output (Q = 30). Using a graph, draw the firm’s isoquant for...

  • Assume that a firm uses capital as a fixed factor of production and uses labor as...

    Assume that a firm uses capital as a fixed factor of production and uses labor as a variable factor. The marginal product of labor at first increases and then decreases with the amount of labor. (a) Using a correctly labeled graph, draw and identify the form’s average total cost curve (ATC), average variable cost curve (AVC), and marginal cost curve (MC). d) Draw a long-run average total cost curve that has a region of economies of scale followed by a...

  • 4. Consider a firm that uses both labor and capital in production. The price of capital...

    4. Consider a firm that uses both labor and capital in production. The price of capital is $20 per unit and the wage rate is S10 per hour. a. Draw the firm's isocost line assuming a total production cost of $100. How steep is this line (that is, what is its slope)? Be sure to clearly label the axes. (3 points) b. Suppose the wage drops to $5 per unit. In which direction does the substitution effect change the firm's...

  • 4. Consider a firm that uses both labor and capital in production. The price of capital...

    4. Consider a firm that uses both labor and capital in production. The price of capital is $20 per unit and the wage rate is $10 per hour. Draw the firm's socost ine assuming a total production cost of $100. How steep is this line (that is, what is its slope)? Be sure to clearly label the axes. (3 points) b. Suppose the wage drops to S5 per unit. In which direction does the substitution effect change the firm's demand...

  • Suppose a firm’s production function is given by Q = L1/2*K1/2. The Marginal Product of Labor...

    Suppose a firm’s production function is given by Q = L1/2*K1/2. The Marginal Product of Labor and the Marginal Product of Capital are given by: MPL = ½ L-1/2K1/2and MPK = ½ L1/2K-1/2 a) Suppose the price of labor is w = 18, and the price of capital is r = 2. Derive the firm’s total cost function. b) What is the firm’s marginal cost? c) For this problem, you will sketch the graph of the firm’s isoquant for Q...

  • 4. Consider a firm that uses both labor and capital in production. The price of capital...

    4. Consider a firm that uses both labor and capital in production. The price of capital is $20 per unit and the wage rate is $10 per hour Draw the firm's isocost line assuming a total production cost of $100. How steep is this line (that is, what is its slope)? Be sure to clearly label the axes. (3 points) Suppose the wage drops to $5 per unit. In which direction does the substitution effect change the firm's demand for...

  • If production technology to manufacture a certain product dictates that labor and capital must be used...

    If production technology to manufacture a certain product dictates that labor and capital must be used in fixed proportions (e.g. 2 workers for 1 machine), an increase in the price of capital will cause a firm to use less labor as a consequence of the output effect. less labor as a consequence of the substitution effect. more labor as a consequence of the substitution effect. more labor as a consequence of the output effect.

  • 2. (12 total points) Suppose a firm can use either Capital (K) or Labor (L) in...

    2. (12 total points) Suppose a firm can use either Capital (K) or Labor (L) in a production process. The firm's production function is given by Q = 5L + 15K. The price of Capital is $20 per unit and the price of Labor is $8 per unit. a) (4 points) What is the firm's Total Cost function? TC(Q)= b) (8 points) Suppose the firm is producing 30 units of output (Q = 30). Using a graph, draw the firm's...

  • A6 Microeconomics Assignment 6 Part I: Short Answer Questions [(100 points) Q1 [30 points) Show in a diagram using isoquants that a production function can have diminishing marginal return to a f...

    A6 Microeconomics Assignment 6 Part I: Short Answer Questions [(100 points) Q1 [30 points) Show in a diagram using isoquants that a production function can have diminishing marginal return to a factor and constant returns to scale? With the help of a diagram explain the concepts of "isoquant", "diminishing marginal return to a factor", and "constant returns to scale". What are the similarities and differences between indifference curves and isoquants. Q2 [30 points Assume that a firm has a fixed-proportions...

  • Suppose the production function is given as ? = √??. Suppose also that the price of...

    Suppose the production function is given as ? = √??. Suppose also that the price of labor ? = 10 and the price of capital ? = 40 1) Derive the equation of the isoquant corresponding to this production function? 2) What type of return to scale does this production exhibit? 3) Does this production function exhibit a diminishing MRTS? Why? 4) Based on this production function, is the law of diminishing marginal returns satisfied? 5) Derive the demand curves...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT