Business, 12.03.2021 15:30 sbelgirl2000

Sometimes, we are interested in the rate at which the MRTS diminishes. That is, does the slope of the isoquant flatten out quickly or slowly as the capital is replaced with labor? This is measured by the elasticity of substitution σ which is the percent change in the ratio K/L per a percent change in the MRTS: σ = (dK/L /dMRTS) (MRTS/ K/L)

The problem consider the constant elasticity of substitution production function

q = (L^rho + K^rho )^1/rho

Let rho = 1/2 and rho be any arbitrary constant less than one.

Required:
a. Explain what it means if σ is large and what it means if σ is small.
b. Calculate the MRTS of the constant elasticity of substitution production function.
c. Solve for K/L in terms of the MRTS.

Answers: 1

Show answers

Another question on Business

Business, 21.06.2019 15:00

What was involved in the american express bluework program? select one: a. employees are provided with opportunities for flexible arrangements b. a system that tracks the hours each employee works in a given day c. employees can work on tasks they choose, as long as they are in the office d. employees who are wary of newer technologies e. employees are provided with better office facilities so they stay in the office longer?

Answers: 3

Answer

Business, 22.06.2019 09:30

Stock market crashes happen when the value of most of the stocks in the stock market increase at the same time. question 10 options: true false

Answers: 1

Answer

Business, 22.06.2019 20:00

Miller mfg. is analyzing a proposed project. the company expects to sell 14,300 units, plus or minus 3 percent. the expected variable cost per unit is $15 and the expected fixed cost is $35,000. the fixed and variable cost estimates are considered accurate within a plus or minus 3 percent range. the depreciation expense is $32,000. the tax rate is 34 percent. the sale price is estimated at $19 a unit, give or take 3 percent. what is the net income under the worst case scenario?

Answers: 2

Answer

Business, 22.06.2019 20:20

Xinhong company is considering replacing one of its manufacturing machines. the machine has a book value of $39,000 and a remaining useful life of 5 years, at which time its salvage value will be zero. it has a current market value of $49,000. variable manufacturing costs are $33,300 per year for this machine. information on two alternative replacement machines follows. alternative a alternative b cost $ 115,000 $ 117,000 variable manufacturing costs per year 22,900 10,100 1. calculate the total change in net income if alternative a and b is adopted. 2. should xinhong keep or replace its manufacturing machine

Answers: 1

Answer

You know the right answer?

Sometimes, we are interested in the rate at which the MRTS diminishes. That is, does the slope of th...

Questions