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Unformatted text preview: MRTS = L K We need to substitute for K (because it is a function of L along an isoquant). From the definition of an isoquant: q = L 2 + K 2 ( ) 1/2 q 2 = L 2 + K 2 K = q 2 ! L 2 ( ) 1/2 Substituting: MRTS = L q 2 ! L 2 ( ) 1/2 ! MRTS ! L = q 2 q 2 " L 2 ( ) 3/2 > This function does not have a diminishing |MRTS|. The isoquants are concave: e. Does the production function satisfy increasing returns to scale, constant returns to scale, or decreasing returns to scale? The function is constant returns to scale....
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- Winter '07
- Economics of production, 2 K, marginal returns, Prof. Jacobsen