ps3v2q - PROBLEM SET 3 VERSION 2 Economics 201 Geoffrey...

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Unformatted text preview: PROBLEM SET 3 VERSION 2 Economics 201 Geoffrey Jehle Present all final answers neatly on these pagesplease do your scratch work somewhere else. Remember to attribute help received. 1. A firms isoquant map is drawn below. In the bottom panel, carefully plot this firms short-run total product curve if capital is fixed at K = 70. 10 20 30 40 50 60 70 80 90 100 110 L 300 450 600 750 900 1050 1200 1350 1500 Q 10 20 30 40 50 60 70 80 90 100 110 L 10 20 30 40 50 60 70 80 90 100 K 150 300 450 600 750 900 1050 1200 1350 1500 2 2. A firms production function is f ( L,K ) = min(2 K, 2 L ) . In the short run, this firm must use 60 units of capital. a. In the upper panel, sketch this firms isoquant map. Include enough isoquants to give a clear idea of the map. b. In the lower panel, draw this firms short-run total product curve. 10 20 30 40 50 60 70 80 90 100 L 20 40 60 80 100 120 140 160 180 200 Q 10 20 30 40 50 60 70 80 90 100 L 10 20 30 40 50 60 70 80 90 100 K 3 3. Two production functions popular in theoretical and empirical work are the Cobb-Douglas and CES forms. The Cobb-Douglas is given by Q = AL K where A > , > , and > . The CES production function has the form, Q = ( L a + K a ) 1 /a where a 1 . In the right-hand column, circle the scale properties displayed by the corresponding pro- duction functions. [ Hint: Recall the definitions of returns to scale. Consider all > 1.] Q = 20...
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ps3v2q - PROBLEM SET 3 VERSION 2 Economics 201 Geoffrey...

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