2019111219462422.pdf - Econ 360 Fall 2019 Homework 4 Due November 19 Tuesday(in class Problem 1(Chapt 19 Production Function(15 Consider the following

2019111219462422.pdf - Econ 360 Fall 2019 Homework 4 Due...

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1 Econ 360; Fall 2019 Homework 4 Due: November 19, Tuesday (in class) Problem 1 ( Chapt: 19, Production Function) (15) Consider the following three production functions: F(K,L)= K 1/4 L 2 ; F(K, L) = K 1/4 L 1/4 ; F (K, L)= K 2 L 2 a) In the (K; L) space, sketch the map of isoquants for each of them. b) Give some economic interpretation for MPK and MPL (for an abstract production function). c) Find analytically MP k for each production function above and plot it in the graph, with K on the horizontal axis and MP k on the vertical axis, assuming L = 1. Is MP k increasing, decreasing or constant? d) Find MP L for each of the four production functions and plot it on the graph, with L on the horizontal axis and MP L on the vertical axis, assuming K = 2. Is MP L increasing, decreasing or constant? e) Provide some economic intuition behind increasing, constant and decreasing returns to scale. Give an example of technology from real life that captures each of the three cases (one example per technology). f) For each of the three production functions above, show formally whether it exhibits increasing, decreasing or constant returns to scale. Problem 2 (Chapt: 20, Profit Maximization- Short run) (25) Northern DeKalb Auto is producing cars using machines (K) and labor (L). The technology is capital intensive; the production function is given by F(K, L) = K 1/2 L
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