A widget manufacturer has an infinitely substitutable production function of the form q = 2K + L

Question:

A widget manufacturer has an infinitely substitutable production function of the form

q = 2K + L

a. Graph the is oquant maps for q = 20, q = 40, and q = 60. What is the RTS along these is oquants?

b. If the wage rate (w) is $1 and the rental rate on capital (v) is $1, what cost-minimizing combination of K and L will the manufacturer employ for the three different production levels in part a? What is the manufacturer’s expansion path?

c. How would your answer to part b change if v rose to $3 with w remaining at $1?

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Intermediate Microeconomics and Its Application

ISBN: 978-0324599107

11th edition

Authors: walter nicholson, christopher snyder

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Question Posted: Jan 21, 2013 04:16 AM

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A widget manufacturer has an infinitely substitutable production function of the form q = 2K + L

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a RTS 12 since if L is increased by one K can be reduced by 12 while holding q constan...View the full answer

Intermediate Microeconomics and Its Application

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