Use the production function Q=10K0.5 L0. 6 to complete the following production table.
Rate of capital input (K)
6 24.5. 56.3. 71.8
5
4. 30.3
3. 45.5
2. 27.3
1. 10.0. 29.3
1. 2. 3. 4. 5. 6
a) For this production system, are returns to scale decreasing, constant, or increasing? Explain
w = $28,
k = $28, Q = 30.3 units,
K = 4 units, L = 2 units.
MPL =
MPk =
Marginal rate of technical substitution MRTS = =
= = 2.4
so we need 2.4 units of K
for every unit of L.
So, K = 4 units and L = 2 units is not an efficient resource
combination. A more efficient combination will be 4.8 units of K and 2
units of L.
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