Problem Set 4 - 3) A plants production function is . For...

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ECON – 301 Problem Set 4 1) Suppose the production function for DVDs is given by ± ²³ ´ µ ³ , where is the number of disks produced per year, ² is machine-hours of capital, and ³ is the man-hours of labor. When either ²· ± ·¸¹¹· or ·²· ± ·º»¹¹ , 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 ± ¼½¾¿À·²Á ·³Ã , where À· and  are positive constants?
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Unformatted text preview: 3) A plants production function is . For this production function, and . The price of labor services is $4 and of capital services is $5 per unit. a. In the short run, the plants capital is fixed at . Find the amount of labor it must employ to produce 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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This note was uploaded on 05/11/2011 for the course ECON 301 taught by Professor Sheng during the Spring '11 term at ITT Tech Pittsburgh.

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