Ans_HW5 - Answer to Practice Homework 5 6.11 For this...

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Answer to Practice Homework 5 6.11 For this production function L MP a = and K MP b = . The , L K MRTS is therefore , L L K K MP a MRTS MP b = = which is constant all along the production function. As MRTS LK is the negative of the slope of the production function, constant MRTS LK signifies that the production function n in this particular situation is linear. 6.13 a) At point A , the firm produces 18 units of output. Therefore, since B is on the same isoquant, it must be that L = 17 at B . b) The capital-to-labor ratio at A is 3/5 and MRTS L,K = ½. At B , the capital-to-labor ratio is 1/17, and MRTS L,K = 1/18. Therefore the elasticity of substitution is . 68 69 ) 2 / 1 /( ) 2 / 1 18 / 1 ( ) 5 / 3 /( ) 5 / 3 17 / 1 ( = - - A Cobb-Douglas production function has an elasticity of substitution of 1. Therefore this production function has a slightly higher elasticity of substitution, indicating a slightly greater ease of substitutability of inputs. 6.20
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Ans_HW5 - Answer to Practice Homework 5 6.11 For this...

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