e360_apks_hw3ans - Homework 3 Answer Key Andreas Pape, Kai...

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Homework 3 Answer Key Andreas Pape, Kai Sun 1. K B A 4 q=1000 L 4 5 The firm is operating at point A at first, namely, it uses 5 workers and 4 grills to produce 1000 hot dogs. But it then operates at point B, using 4 workers and 4 grills and still producing 1000 hot dogs. This implies that Roy was not minimizing the firm’s cost (or not maximizing the firm’s profit) initially. His management skills should be improved. 1
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Homework 3 Answer Key Andreas Pape, Kai Sun 2. a. Returns to an input (such as Labor) means, holding everything else constant, if a firm uses one more unit of labor, how many more units of output it can produce. Returns to scale means if both labor and capital are doubled, for example, is the output doubled (constant returns to scale), or less than doubled (decreasing returns to scale), or more than doubled (increasing returns to scale)? b. Yes. Let’s say the production function is: , where 0< α <1 and 0< β <1 and α + β >1.
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This note was uploaded on 09/18/2010 for the course ECON 360 taught by Professor Andreaspape during the Fall '08 term at Binghamton University.

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e360_apks_hw3ans - Homework 3 Answer Key Andreas Pape, Kai...

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