Suppose an Economy Uses Only Two Inputs in Production: Capital

question 100

Essay

Suppose an economy uses only two inputs in production: capital and labour. The following table describes a production function, where y stands for output per worker and k is capital per worker.
a) Draw approximately this production function with y on the vertical axis.
b) Show that this production function exhibits diminishing returns to scale.
c) Suppose there are two countries, A and B. The economies of the two countries can be described by this production function. If Country A has initially a capital-labour ratio k = 0.167 and Country B has k = 0.412, show that an equal increase in capital produces more extra output in country A than in Country B.

Explain the concept of concerted reactions and how they differ from stepwise reactions.

Understand the concept and application of Two-Factor Analysis of Variance (ANOVA).

Identify and interpret interaction between factors in a factorial experiment.

Describe and perform steps necessary for conducting a factorial experiment.

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Definitions:

Corresponding Cost

Corresponding cost refers to the specific expenses directly associated with the production of a good or service, similar to direct costs.

Discount Period

The time frame in which a payment can be made at a discounted rate from the total amount owed.

Perpetual

An inventory system where updates are made continuously to the inventory records, reflecting each sale or purchase.

Periodic Inventory System

An inventory system in which the inventory count and the cost of goods sold calculation are performed at set intervals, typically at the end of an accounting period.