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At a Pareto-efficient allocation of inputs:

   

A. the firms will have equal marginal rates of technical substitution.
   

B. the MRTS of one firm is equal to W/R, while the MRTS of the other firm is equal to R/W.
   

C. the firms must be producing the same quantity of output.
   

D. one firm will have a higher MRTS than the other.

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Joshua Stredder
Joshua StredderLv10
28 Sep 2019
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Related questions

1.Production efficiency.

A)state the condition for production in terms of which slopes are equal. use terms such as MRS,MRTS,MRT,and/or - P horizontal/P vertical P horizontal refers to the price of the good on the horizontal axis. Use subscripts and/or superscripts on MRS and MRTS as appropriate. In this case, P horizontal is the cost of labor (w)and P vertical is the cost of capital(r)

B) Draw an Edgeworth box for production efficiency. The K and L isoquants should show both inefficient ( crossing and efficient ( tangent) relationships.

C) Explain why points at isoquant intersection are inefficient. This answer has nothing to do with the answer to 1a above. The answer to this question is not whether the curves cross or are tangent but rather what happens to production levels at the same cost as production is moved to an efficient point on the contract curve.

D) State two governmental policies which could cause the production mix to remain at an inefficient point. This is the same as saying what policies could prevent the prices of the two factors of production(w/r) from adjusting to offer the same relative cost of inputs to all producers.

By studying, Will can produce a higher grade, Gw, on an upcomingeconomics exam. His production function depends on the number ofhours he studies marginal analysis problems, A, and the number ofhours he studies supply and demand problems, R. Specifically, Gw =2.5(A)^(0.36)B^(0.64). His roommate David's grade productionfunction is Gd=2.5A^(0.25)B^(0.75).

a. What is Will's marginal productivity from studying supply anddemand problems? What is David's?

b. What is Will's marginal rate of technical substitution (MRTS)between studying the two types of problems? What is Davids?

c. Is it possible that Will and David have different marginalproductivity functions but the same marginal rate of technicalsubstitution functions? Explain.

I GIVE FULL KARMA!

You manage a plant that mass-produces engines by teams of workers using assembly machines. The technology is summarized by the production function q = 5 KL, where q is the number of engines per week, K is the number of assembly machines, and L is the number of labor teams. Each assembly machine rents for r = $10,000 per week, and each team costs w = $5000 per week. Engine costs are given by the cost of labor teams and machines, plus $2000 per engine for raw materials. Your plant has a fixed installation of 5 assembly machines as part of its design. a) What is the total cost function for your plant—namely, how much would it cost to produce q engines? What are average and marginal costs for producing q engines? How do average costs vary with output? (Clue: the total cost function should be defined in terms ONLY of output, q) b) How many teams are required to produce 250 engines? What is the average cost per engine? c) You are asked to make recommendations for the design of a new production facility. What capital/labor (K/L) ratio should the new plant accommodate if it wants to minimize the total cost of producing at any level of output q? (Clue: to calculate the MRTS of labor for capital --as the ratio of marginal products of the two inputs—and, afterwards, to equal the MRTS to the ratio of input prices).

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