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Problem Set 4 - 3 A plant’s production function is ±...

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ECON 301 Problem Set 4 1) Suppose the production function for DVDs is given by , where is the number of disks produced per year, is machine-hours of capital, and is the man-hours of labor. When either or , does the total product function have a region of increasing marginal returns? 2) What can you say about the returns to scale of the Leontief production function , where and are positive constants?
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Unformatted text preview: 3) A plant’s production function is ± »²³ µ ² . For this production function, ÄŲ· ± ·»³· µ ·º and Äų· ± ·»² . The price of labor services Æ is $4 and of capital services Ç is $5 per unit. a. In the short run, the plant’s capital is fixed at ² È ± É . Find the amount of labor it must employ to produce ± ÊË units of output. b. How much money is the firm sacrificing by not having the ability to choose its level of capital optimally?...
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