(Figure: Capital and Labor XVI) Consider the Production Function Q

question 106

Essay

(Figure: Capital and Labor XVI) Consider the production function Q = L^0.5K^0.5, with MP_K = L^0.5/K^0.5 and MP_L = K^0.5/L^0.5.
a. Define the marginal rate of technical substitution.
b. Calculate the marginal rate of technical substitution for K = 5 and L = 10.
c. Figure 6.16 shows an isoquant based on the production function referred to in the question. Calculate the slope of the isoquant at point A and point B.

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Definitions:

Cost Function

A mathematical relation that defines the total cost of production as a function of the quantity of output produced.

Profit-Maximizing

The procedure companies undertake to find the best combination of price and production volume for peak profit.

Output

The quantity of goods or services produced by a company, industry, or economic system.

Housing Development

A planned residential community, often including various amenities, constructed by developers and divided into individual properties for sale.