<Lecture 12> 6. Production
Q1. Isoquants can be convex, linear, or Lshaped. What does each of these shapes tell you about the nature
of the production function? What does each of these shapes tell you about the MRTS?
Convex isoquants imply that within some range, some number of units of one input can be
substituted for a unit of the other input, and output can be maintained at the same level. In this case,
the MRTS is diminishing as we move down along the isoquant.
Linear isoquants imply that the slope, or the MRTS, is constant. This means that the same number
of units of one input can always be exchanged for a unit of the other input and output can be
maintained. In this case, the inputs are perfect substitutes.
Lshaped isoquants imply that the inputs are perfect complements, or that the firm is producing
under a fixed proportions type of technology. In this case the firm cannot give up one input in
exchange for the other input and still maintain the same level of output.
Perfect Substitutes & Perfect Complements
(p.204)
Substitutes: Musical instruments can be manufactured almost entirely with machine tools or with very few
tools and highly skilled labor.
1
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View Full DocumentComplements: In the reconstruction of concrete sidewalks using jackhammers, it takes one person to use a
jackhammer – neither two people and one jackhammer nor one person and two jackhammers will increase
production.
Q2. The marginal product of labor in the production of computer chips is 50 chips per hour. The marginal
rate of technical substitution of hours of labor for hours of machinecapital is 1/4. What is the marginal
product of capital?
MRTS is defined at the ratio of the two marginal products. To determine the marginal product of
capital, substitute the given value for the marginal product of labor and the marginal rate of
technical substitution into the following formula:
MRTS = MP
L
/ MP
K
= 1/4 = 50/MP
K
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 Spring '09
 Cheng
 Economics, Microeconomics, Marginal product, Economics of production, MRTS

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