Problem Set 05

# Problem Set 05 - 570.693 Problem Set 5 1 Suppose that a...

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570.693 – Problem Set 5 1. Suppose that a firm produces a product, Q , using inputs X and Y . The firm's production function in the relevant region is given by: Q = 10X 0.4 Y 0.8 Inputs X and Y are available at the following prices: P x = 2.0; P y = 6.0 Find the technical rate of substitution (of X for Y ) at X = 2; Y = 4. What is Q at this point? What is total cost ( TC )? Is this a cost minimizing point? 2. Suppose that the quantity of Y used in the production process described by (1-1), above, is set at 10 and cannot be changed. What is the short run expansion path? 3. Does the production function in problem 1 (equation (1-1)) show increasing or decreasing

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