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##### production functions use the degree of homogeneity

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**Question**

13. (30,1) For each of the following production functions use the degree of homogeneity (IF ANY) to determine whether the function displays increasing, decreasing, constant returns to scale, or no degree of homogeneity, and thus no returns to scale.;A. Q = 2.437K.25L.35R.49;B. Q = 1.2[.4K-.4 +.6L-.4]-1/.4 Note: this is a CES production function;C. Q = 2.34[K.3L.4 + L.5R.2 + K.2R.5];14. (50,5) You are the manager of Bonnie=s Unknown Lexicon Lists, Silly Hat Incorporation Tapestry Company. A company dedicated to making tapestry and upholstery fabric. You have hired a consultant to determine that your production function is given by;Q = K.25L.40F.2D.20 Where K equals units of Capital, L equals number of hours of labor, F equals yards of fabric, and D equals gallons of dye.;You have determined (by finding both your marginal cost function and your marginal revenue function) that your profit maximizing quantity of upholstery is 125,000 yards. If the real interest rate is 4.5%, the wage rate is $14 per hour, the cost of fabric is $10 per yard, and the cost of dye is $13 per gallon. Find the cost minimizing quantities of each of the inputs.

Paper#21475 | Written in 18-Jul-2015

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