Consider the following variation of the aggregate production function. Nowfirms must use oil M to produce output (in addition to labor and capital). Theprice of a unit of oil is pПmax II = AK°L³M – wL-rK – pM(a) Find a first-order condition for the firm's demand for oil.(b) What must be true about the parameters a, B, and y if this productionfunction exhibits constant returns to scale?(c) If the price of oil p rises, what would you expect to happen to carbonintensity (the ratio of oil per unit output: M/Y) in this economy? Whathappens to the revenue share of oil (the ratio of total oil payments tooutput: pM/Y)?

a) To find the first-order condition for the firm's demand for oil, we take the derivative of the…

Answered: Consider the following variation of the…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.9P

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Q1 a) Given a production function depicting the response of paddy rice tofertilizer application,Y = 3X+ 9X2 - X3(i) Calculate the exact MPP and APP.(ii) At what level of fertilizer input(X) does MPP, APP and TPP reachtheir maximum values?(iii) At what level of fertilizer input will r = 0? And what is the valueof TPP at that level?(iv) If the farmer increases the amount of fertilizer in his riceproduction in his area of diminishing returns, explain whether ornot total production will increase or decrease.b) Explain the economic significance of farm records.Q2 a) What are the major objectives of agricultural marketing?b) Explain how one can evaluate the efficiency of a marketing situation.
Q1 a) Given a production function depicting the response of paddy rice tofertilizer application,Y = 3X+ 9X2 - X3(i) Calculate the exact MPP and APP.(ii) At what level of fertilizer input(X) does MPP, APP and TPP reachtheir maximum values?(iii) At what level of fertilizer input will r = 0? And what is the valueof TPP at that level?(iv) If the farmer increases the amount of fertilizer in his riceproduction in his area of diminishing returns, explain whether ornot total production will increase or decrease.
For the production function Qs = K0.4L0.1 find the returns to scale, recall that a doubling of inputs that doulbes output is a CONSTANT returns to scale = 1.0 Please enter your response as a positive number with 1 decimal and 5/4 rounding (e.g. 1.15 = 1.2, 1.14 = 1.1).
Consider the production function f(x1, X2) = 4x1x2, where x1 and x2 are the quantities of inputs 1 and 2, respectively. One of the following statements is true. %3D Which statement is true? The production function exhibits: А Constant returns to scale. Increasing returns to scale. C Decreasing returns to scale.
Answer the Constrained Optimization: Cobb-Douglas Production Function:1. Based from the factor shares of the two inputs, what will happen to the number of output if it the firm decides to triple both the amount of labor and capital?
Sam Malone is considering renovating the bar stools at Cheers.The production function for new bar stools is given byq = 0.1k 0.2l0.8 where q is the number of bar stools produced during the renovation week, k represents the number of hours of bar stoollathes used during the week, and l represents the number ofworker hours employed during the period. Sam would like toprovide 10 new bar stools, and he has allocated a budget of$10,000 for the project.a. Sam reasons that because bar stool lathes and skilled barstool workers both cost the same amount ($50 per hour),he might as well hire these two inputs in equal amounts.If Sam proceeds in this way, how much of each input willhe hire and how much will the renovation project cost?b. Norm (who knows something about bar stools) arguesthat once again Sam has forgotten his microeconomics.He asserts that Sam should choose quantities of inputs sothat their marginal (not average) productivities are equal.If Sam opts for this plan instead, how much of…
For the production function Qs = K0.5L0.7 find the returns to scale, recall that a doubling of inputs that doulbes output is a CONSTANT returns to scale = 1.0
Under what conditions do the following production functions exhibit decreasing, constant, or increasing returns to scale? a) q=L+K b) q=LaKb c) q= L+ LaKb + K
Consider the following production function: f (A, B) = gamma multiply A^alpha multiply B^Beta. where A and B are the inputs and alpha, Beta, gamma are in the set (0,1). Let wA and wB the price of the two inputs. Assume wA, wB > 0. Is the production function separable?Does the production function exhibit constant returns of scale?Compute the cost function and the conditional input demand function.How do these three functions react to a change in wA? Suppose the price of both inputs double, what happens to the conditional input demand function? And to the cost function? Suppose the desired level of output double, what happens to the conditional input demand function? And to the cost function?…
1) For the following functions of production, find the functions of conditional input demand and the cost functions a. q = A min(az,, bz2}; b. q = Azf z; C. q = azı + bz2 d. q = az, + b(lnz2) a, b > 0 A, a, b > 0 A, a, b > 0 a, b > 0 2) For A and D of Point 1, verify Shepard's lemma. 3) For B demonstrate that is possible to retrieve the supply function based on what has been developed so far, in this case, atb<1 www.
The number of souvenir coffee mugs (in hundreds) that Ace Novelty can produce monthly is given by the production function where x denotes the amount of labor utilized (measured in thousands of work-hours per month) and y denotes the expenditure on capital investment (in thousands of dollars per month). Find the marginal productivities if 10,000 work-hours per month are utilized and a capital investment of $5000/month is made. Interpret your results.
Q2. A firm's production function is Q = 9LZ+1)/10KY+1)/10 %3D • Find out MPL and MPK. • Find out APL when K=16 L= 64.

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