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Unformatted text preview: 2. Firm 1 and Firm 2 use the same type of production function, but Firm 1 is only 90% as productive as Firm 2. That is, the production function of Firm 2 is x 2 = f(K, L) and the production function of Firm 1 is x 1 = 0.9f(K, L). At a particular level of inputs, how does the marginal product of labor differ between the firms? The marginal product of labor for Firm 1 is only 90% of the marginal product of labor for Firm 2 for a particular level of inputs. Using calculus we find that the MP L for Firm 1 is ∂ x 1 / ∂ L = 0.9 ∂ f(L, K)/ ∂ L = 0.9 ∂ x 2 / ∂ L Econ 313 - Spring 2004 PS#4-XtraQ - ANSWERS...
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This homework help was uploaded on 10/31/2007 for the course ECON 3130 taught by Professor Masson during the Fall '06 term at Cornell University (Engineering School).
- Fall '06