A Firm Has the Following Production Function

question 15

Essay

A firm has the following production function:
q = (L^1/3 + K^1/3)³
a.Determine the returns to scale for this function.
b.Determine the MRTS.
c.Determine the Elasticity of Substitution.

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Definitions:

Variable Costs

Expenses that fluctuate with changes in production volume or business activity levels.

Special Order

An order for goods or services that is outside the company's normal production or service offerings, often requiring special pricing or terms.

Financially Better

A state or condition where financial health, performance, or position has improved or is superior to a previous state or to another entity's state.

Total Contribution Margin

The difference between total sales revenue and total variable costs, indicating how much revenue contributes toward covering fixed costs and generating profit.