If a new type of capital is introduced into a production process such that a firm can

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If a new type of capital is introduced into a production process such that a firm can use fewer workers and still produce the same level of output, what type of technological progress is this? Suppose that the firm uses the Cobb-Douglas production function, \(q=(\beta K)^{0.5} L^{0.5}\), where \(\beta\) represents the level of this type of technological progress. Before the innovation, the firm used 16 units of labor and 4 units of capital, and \(\beta=1\). With the innovation, it uses 4 units of both labor and capital to produce the same level of output, and \(\beta=4\). What is the effect of this invention on the average and marginal product of labor?

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Microeconomics

ISBN: 9781292215624

8th Global Edition

Authors: Jeffrey Perloff

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