Question

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 production function, in which one unit of output is produced using one worker and two units of capital. If the firm has an extra worker, say two workers, and no more capital, it still can produce only one unit of output. Similarly, an extra unit of capital does the firm no good. isoquants for this production function. b) Draw the total product, average product, and marginal product of la- bor curves (you will probably want to use two diagrams) for this production function.

Answer 1

3o Is 6

Isoquant and IC both slopes downward and convex to the origin

Two IC or Two Isoquant can't intersect each other

Slope of IC is MRS and slope of Isoquant is MRTS.

Higher IC represent higher level of satisfaction and higher Isoquant represent higher level of production