Microeconomic problems

ECO 405: HW 4

Sean Fahle State University of New York at Buffalo

Spring 2016

Due date: Wednesday, April 6.

You are encouraged to collaborate with your classmates on this assignment. However, all students must individually write up and submit their own assignment. Assignments are due in class at the beginning of the lecture on the due date. Late assignments may receive no credit.

1. P&R 8th ed., Ch. 6, Q8. Do the following functions exhibit increasing, constant, or decreasing returns to scale? What happens to the marginal product of each individual factor as that factor is increased and the other factor as held constant?

(a) q = 3L + 2K

(b) q = (2L + 2K) 1 2

(c) q = 3LK2

(d) q = L 1 2 K

1 2

(e) q = 4L 1 2 + 4K

2. P&R 8th ed., Ch. 7 Appendix, Q3. Suppose a production function is given by F(K, L) = KL2; the price of capital is $10 and the price of labor is $15. What combination of labor and capital minimizes the cost of producing any output?

1