Calculate elasticity of substitution (µ) between L and K for the following production function.
µ = d log ( K / L ) / d log ( MRTSL,K )
|MRTSL,K| = (dQ / dL) / (dQ / dK)
A) Q = [ AL(n) + (1-A) K(n) ] (1/n)
B) Q = AL(1/2) K(3/2)
C) Q = AL(1/2) K(1/4)
Calculate elasticity of substitution (µ) between L and K for the following production function.
µ = d log ( K / L ) / d log ( MRTSL,K )
|MRTSL,K| = (dQ / dL) / (dQ / dK)
A) Q = [ AL(n) + (1-A) K(n) ] (1/n)
B) Q = AL(1/2) K(3/2)
C) Q = AL(1/2) K(1/4)
Related textbook solutions
Related questions
All of the following have a few things in common that we discussed in class. After answering them write a summary of what those things are?
1. Consider a firm with production function f(L, K)=3L1/3K2/3. Assume that capital is fixed at K=1. Assume also that the price of capital r=5 and the price of labor w=3. Then, the cost of producing q units is?
| A. |
C(q)=3+q2/9. |
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| B. |
C(q)=10+q3. |
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| C. |
C(q)=5+q3/9. |
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| D. |
C(q)=2/3+q2/3. |
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| E. |
C(q)=1/3+q3/3. |
2. Consider a firm with production function f(L, K)= 4L2/3K1/3. Assume that capital is fixed at K=1. Assume also that the price of capital r=4 and the price of labor w=2. Then, the average cost of producing q units is?
| A. |
AC(q)= 4/q+q1/2/4. |
|
| B. |
AC(q)= 2/q+1/4q1/3. |
|
| C. |
AC(q)= 2/3q+1/q1/3. |
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| D. |
AC(q)= 1/3q+q1/2. |
|
| E. |
AC(q)=8/q+2q1/2. |
Consider a firm with production function f(L, K)= 4L2/3K1/3. Assume that capital is fixed at K=1. Assume also that the price of capital r=4 and the price of labor w=2. Then, the marginal cost of producing q units is?
| A. |
MC(q)= 3q1/2/8. |
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| B. |
MC(q)= 2/3q1/3. |
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| C. |
MC(q)=3/2q1/2. |
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| D. |
MC(q)=3q1/2. |
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| E. |
MC(q)=1/6q1/3. |
