Suppose you're a manager at a plant producing Aston Martin cars. You estimate that your production function is q = 0.1L²K³ where q is the quantity produced, L is labor, and K is capital. Suppose in the short-run, capital is fixed at 3 units. a. What is the short-run production function? b. In the long-run, does this production function have constant returns to scale, increasing returns to scale, or decreasing returns to scale? u take a part time job at a grocery store. Using your knowledge of economics, you timate that the demand for milk is inelastic. If you decide you want to increase your al revenue, should you lower the price of milk or increase the price of milk?
Suppose you're a manager at a plant producing Aston Martin cars. You estimate that your production function is q = 0.1L²K³ where q is the quantity produced, L is labor, and K is capital. Suppose in the short-run, capital is fixed at 3 units. a. What is the short-run production function? b. In the long-run, does this production function have constant returns to scale, increasing returns to scale, or decreasing returns to scale? u take a part time job at a grocery store. Using your knowledge of economics, you timate that the demand for milk is inelastic. If you decide you want to increase your al revenue, should you lower the price of milk or increase the price of milk?
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.9P
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Transcribed Image Text:4. Suppose you're a manager at a plant producing Aston Martin cars. You estimate that
your production function is q = 0.1L2K³ where q is the quantity produced, L is labor, and
K is capital. Suppose in the short-run, capital is fixed at 3 units.
a. What is the short-run production function?
b. In the long-run, does this production function have constant returns to scale,
increasing returns to scale, or decreasing returns to scale?
. You take a part time job at a grocery store. Using your knowledge of economics, you
estimate that the demand for milk is inelastic. If you decide you want to increase your
total revenue, should you lower the price of milk or increase the price of milk?
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