Fuentes Peters
07/06/2024 · Senior High School

Write short notes on the following; a) Isoquants b) Isoquant lines c) Marginal rates of technical substitution d) Production function QUESTION Two Discuss the reasons for the growth in size of firms and outline the ways can grow QuESTION THREE Consider a production function of the firm Q = AL, where O < \( \mathrm{a}<1 \) Required; a) Find the marginal product of L (MPL) b) Express the MPL in terms of \( \mathrm{L}, \mathrm{L} \), and Q c) Determine the slope of MPL d) What is the sign of the slope of MPL? e) Determine whether the MPL increases, diminishes or stays const increases. QUESTION Four Given the production function; \( \mathrm{Q}=200-\mathrm{L}^{2}-\mathrm{K}^{2} \) And corresponding art function \( \mathrm{C}=2 \mathrm{~L}+3 \mathrm{~K} \) The firm wishes to maximize its output given a cost outlay of \( \mathrm{C}=30 \) Required a) Write down the maximization problem for the firm b) Find the levels of K and L for which Q is maximized

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**a) Isoquants:** Isoquants are curves that show all combinations of inputs that yield the same level of output. **b) Isoquant Lines:** Isoquant lines are graphical representations of isoquants, showing the trade-offs between inputs for a given output. **c) Marginal Rates of Technical Substitution (MRTS):** MRTS is the rate at which one input can be substituted for another while maintaining the same level of output. **d) Production Function:** A production function describes the relationship between inputs and output. **Reasons for Firm Growth:** 1. Economies of scale 2. Market power 3. Access to capital 4. Diversification 5. Innovation **Ways Firms Can Grow:** 1. Internal growth 2. Mergers and acquisitions 3. Franchising 4. Joint ventures 5. Geographic expansion **Question Three:** a) MPL = A b) MPL = Q/L c) Slope of MPL is 0 d) Sign of slope of MPL is 0 e) MPL stays constant **Question Four:** a) Maximize Q subject to the cost constraint b) L ≈ 2.73, K ≈ 8.18

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