Question #51408

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.

Expert's answer

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.

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.

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