Consider the production function ? = ?? ?? ? where ? is output, ? is capital,...

Consider the production function ? = ?? ?? ? where ? is output, ? is capital, ? is labour and ?, ? and ? are positive parameters.

a. Derive the parametric conditions under which production exhibits CRS, IRS and DRS, respectively.

b. Let ?(?,?0) be the isoquant associated with output level ?0. Derive the expression for ?(?,?0). In a graph, illustrate this function and the effect of an innovation represented by an increase in the value of ?.

c. For output level ?0, let the cost-minimizing input levels be ? ∗ (?, ?) and ? ∗ (?, ?), where ? and ? are the prices of labour and capital, respectively. Derive the functions ? ∗ (?, ?) and ? ∗ (?, ?).

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Expert Solution

Rahul Sunny answered 1 year ago

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