Topic 02 Technology

Question 1

production function

Answer 1

how many units of output can be produced max, with the given combination of inputs
q=f(K,L) tells us what level of q is created using capital and labour

Question 2

marginal product of labour equation

Answer 2

change in quantity/change in labour
extra product generated by one extra unit of labour (slope of production function)

Question 3

isoquant

Answer 3

set of all combinations of inputs that lead to the same level of output

Question 4

slope of isoquant (marginal rate of technical substitution)

Answer 4

change in labour/change in capital or -MP(L)/MP(K)
shows how a firm can substitute one for the other without choosing output

Question 5

cobb-douglas production function

Answer 5

AK^aL^b
A must be positive
a+b must be less than 1

Question 6

properties of an isoquant

Answer 6

thin
north-east means higher output
cant cross
every point has an isoquant

Question 7

how is diminishing and increasing returns to scale demonstrated on a diagram

Answer 7

parallel slice diminishing-capital stays fixed with inc labour
diagonal slice increasing

Question 8

profit

Answer 8

rev-cost

Question 9

how would you find the level of labour and capital to use to produce a quantity?

Answer 9

minimise cost. use desired q with cost function C(q)=rK(q)+wL(q)
profit max- how much to produce and shut down decision (whether to produce at all)