Question

at L=4, K=4, the marginal product of labor is 2 and the marginal product of capital is 3. what is the rate of technical substitution?

to produce a recorded CD, q=1, the firm uses one blank disk, D=1 and the service of a recording machine M=1 for one hour.
a) draw an isoquant for this production process
b) explain the reason for its shape.

Answer 1

L=4, K=4, the marginal product of labor is 2 and the marginal product of capital is 3. So, the rate of technical substitution is MPk/MPl = 3/2 = 1.5 to produce a recorded CD, q=1, the firm uses one blank disk, D=1 and the service of a recording machine M=1 for one hour.
a) If we draw an isoquant for this production process, it will not be symmetric, because the marginal product of labor is 2 and the marginal product of capital are not equal.
b) The reason for its shape is the inequality of marginal products of capital and labor.