Answer the attached question [VC] A firm is using a Cobb-Douglas production function q = (K(ª)) × (L1-4)) inthe creation of bottled soda. Let q = the number of cases of bottled sodas, K = the number ofmachines, L = the number of workers hired, and a = .[VC] Suppose a new technology comes along allowing the firm to replace all< (K(ª)) × (L(1-«)) where z > 1their existing machines resulting in production of q = z xor the firm can introduce a new method with the existing machinary making productionq = (K(@)) × (zL)(1-4) for z > 1, i.e. there is a neutral technological change or a laboursaving change in the method of production. Which technology would the firm prefer?(hint: if stuck try z = 8) How should the firm respond in the short-run? Is your answer thesame for the long-run? Explain.

A Cobb-Douglas production function is a tool that describes how much output a company can produce…

[VC] A firm is using a Cobb-Douglas production function q = (K(a)) × (L(1-a)) in the creation of bottled soda. Let q = the number of cases of bottled sodas, K = the number of machines, L = the number of workers hired, and α = ³½³. [VC] Suppose a new technology comes along allowing the firm to replace all their existing machines resulting in production of q = z × (K(a)) × (L(1-a)) where z > 1 or the firm can introduce a new method with the existing machinary making production q = (K(a)) × (zL)(1−a) for z > 1, i.e. there is a neutral technological change or a labour saving change in the method of production. Which technology would the firm prefer? (hint: if stuck try z = 8) How should the firm respond in the short-run? Is your answer the same for the long-run? Explain.

[VC] A firm is using a Cobb-Douglas production function q = (K(a)) × (L(1-a)) in the creation of bottled soda. Let q = the number of cases of bottled sodas, K = the number of machines, L = the number of workers hired, and α = ³½³. [VC] Suppose a new technology comes along allowing the firm to replace all their existing machines resulting in production of q = z × (K(a)) × (L(1-a)) where z > 1 or the firm can introduce a new method with the existing machinary making production q = (K(a)) × (zL)(1−a) for z > 1, i.e. there is a neutral technological change or a labour saving change in the method of production. Which technology would the firm prefer? (hint: if stuck try z = 8) How should the firm respond in the short-run? Is your answer the same for the long-run? Explain.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.7P

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