Suppose the Production Function of Automobiles Is Given by

question 17

Essay

Suppose the production function of automobiles is given by a. Show that the marginal product of any given quantity of labor increases as capital is increased.
b. Suppose Japanese and U.S. automakers produce on identical isoquants with this Cobb-Douglas production function and that labor costs are higher in Japan than in the United States. Do autoworkers in Japan have a higher marginal product than American autoworkers? Explain carefully.
c. Now suppose Japanese automakers produce on a different isoquant from U.S. firms, but the prices of Japanese and American cars are identical. Do Japanese or American autoworkers have a higher marginal product? Why?

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Definitions:

Secure Form

A digital form that implements security measures to protect the data being transmitted from unauthorized access or alterations.

Importer's Bank

A financial institution that facilitates transactions, including payment, for a company importing goods from another country.

Small Scale Industry

A sector comprising of businesses that operate on a small scale, typically characterized by low investment, fewer employees, and less revenue compared to large-scale industries.

Open Account

A form of payment in which an importer doesn’t pay for goods until after they have been received, creating an unfavorable balance of value for the exporter.