Question

production function Consider a firm that produces a single output good Y with two input goods: labor (L) and capital (K). The firm has a technology described by the production function f : R 2 + → R+ defined by f(l, k) = √ l + √ k, where l is the quantity of labor and k is the quantity of capital. (a) In an appropriate diagram, illustrate the map of isoquants for the firm’s production function. (b) Does the firm’s technology satisfy the following properties: (i) monotonicity (i.e., are the marginal product of labor and the marginal produc of capital strictly positive), (ii) the no-free-lunch property, (iii) constant/decreasing/increasing returns to scale? (c) What is the firm’s marginal rate of technical substitution?

Answer 1