Consider the following production function: x=4K 0.5 L 0.5 where x denotes the level of output, K is capital input, L is labor input, w is unit price of labor and r is unit price of capital. a. Is the function increasing, decreasing, or constant returns to scale? Explain why. b. Find the function for the firm’s expansion path. c. Determine the cost constrained conditional demand function for K and L. d. With w = Br. 1 and r = Br. 4, find the output maximizing input combination if cost is limited to Br. 120. e. What is the corresponding output level?

/in /by

Consider the following production function: x=4K 0.5 L 0.5 where x denotes the level of
output, K is capital input, L is labor input, w is unit price of labor and r is unit price of
capital.
a. Is the function increasing, decreasing, or constant returns to scale? Explain why.
b. Find the function for the firm’s expansion path.
c. Determine the cost constrained conditional demand function for K and L.
d. With w = Br. 1 and r = Br. 4, find the output maximizing input combination if cost is
limited to Br. 120.
e. What is the corresponding output level?

You might also like
Consider the market for sewing machine. The demand for sewing machine is represented by the equation: P = 110 – 20QD and the supply of sewing machine is represented by the equation: P = 10 + 5QS. a) Calculate the equilibrium price and quantity of sewing machine. b) If the market price becomes $45, what will happen to demand and supply of sewing machines in the market?
Econometrics deals with the measurement of economic relationships which are stochastic or random. The simplest form of economic relationships between two variables X and Y can be represented by: Yi   0  1Xi Ui ; where  0 and 1  are regression parameters and Ui  the stochastic disturbance term What are the reasons for the insertion of U-term in the model?
Mr Mahlangu invests R20 000,00 to pay for lobola. After 48 months he receives R65 000,00. The interest on the investment is compounded quarterly. Determine the yearly interest rate at which the money was invested. Give your answer as a percentage, rounded to two decimal places.
Consider a consumer who wants to consume only two commodities and has an income of $100. Assume the price of good 1 is $10 per unit and the price of good 2 is $20 per unit. Now, inflation causes the price of good 1 to increase to $20 per unit, while the price of good 2 increases to $25 per unit. On the other hand, the consumer also gets a raise of $100 (so her new income is $200). Is she better off or worse off?
In equilibrium a consumer was buying 5 units of good A and some of good B. His income was Rs 100 and the prices were P A = Rs 8 and P B = Rs 5. The price of good A falls to Rs 5. By how much does his income need to be compensated so that he is able to buy the (old) bundle at the original equilibrium?
Nick and Liz have decided to move from the city to the suburbs this means that they will have to make the essential purchase of a car in order to get to work they researched used 2 year old cars of the same make model and condition and equipped with the same options they found a website stating that the average price should be 18500 these are the prices they were quoted 15500,18800,16900,19900,18000,21000 if they continued their search for one more price quote what would that price have to be so that the mean of all seven of the car prices would be the same as the mean quotes on the website
Xolisile and Xolani are twins. To reward them for passing matric well, their parents gave them R20 000,00 each. Each one of them decided to invest three quarters of their money for a period of three years. Xolisile invested her money at a simple interest rate of 6,5% per annum. Xolani invested her money at an interest rate of 6,5% per annum, compounded annually. What is the difference between the values of the two investments at the end of the period?
Suppose that a consumer always consumes 2 spoons of sugar with each cup of coffee. If the price of sugar is P 1 per spoonful and the price of coffee is P 2 per cup and the consumer has M dollars to spend on coffee and sugar, how much will he or she want to purchase?