{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

PS 4 - Intermediate Microeconomics Problem Set#4 Due...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Intermediate Microeconomics Problem Set #4 Due Tuesday, November 6 at 9:30 1) Suppose that the production function is given by q=L α K β where α >0, β >0, and α + β <1. Show that (a) the production function is characterized by diminishing marginal product of labor (that is, calculate the marginal product of labor and show that it declines with higher quantities of labor), (b) the marginal rate of technical substitution depends only on the ratio K/L and not on the level of output, and (c) the production function is characterized by decreasing returns by scale. 2) Evaluate the following statements. a) A jeweler leaves the prices of her gold necklaces at their prices when made even though the price of gold has since doubled. Her rationale is that "I make money even at the old prices." Does she? b) You are working for General Foods and it has an attractive investment project. It can finance the project by borrowing funds at an interest rate of 10 percent. Alternatively, it can finance the project out of its current profits without borrowing. The financial VP says it should choose the
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern