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Unformatted text preview: PROBLEM SET 4 Due: Wednesday, March 4th Please write as neatly as possible and circle all of your final answers. Chapter 6 Questions : 1. A firm is required to produce 100 units of output using quantities of labor and capital (L, K) = (7, 6). For each of the following production functions, state whether it is possible to produce the required output with the given input combination. If it is possible, state whether the input combination is technically efficient or inefficient. a. g = 7G + 8¡ b. g = 20u¡G c. g = Min (16G, 20¡) d. g = 2(KL + L + 1) 2. Suppose that a firm’s production function is given by g = KL + K . At point A, the firm uses K=3 units of capital and L=5 units of labor. At point B, along the same isoquant, the firm would use only 1 unit of capital. a. Find the ¢£ ¤ and ¢£ ¥ for this production function. b. Calculate how much labor is required at point B. c. Calculate the elasticity of substitution between A and B. 3. To produce cake, you need eggs E and premixed ingredients I. Every cake needs exactly one egg and one package of ingredients. When you add two eggs to one package of ingredients you only get one cake. Similarly when you have only one egg, you cannot produce two cakes even though...
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 Spring '07
 Codrin
 Economics, Supply And Demand, Economics of production, Elasticity of substitution

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