i) A multi - product firm produces two non - related products X and Y where production functions are given by Qx = L075K@5, Qy La5K@7. Qx and QY are quantities of outputs of X and Y per period of time andL and K are inputs of labour and capital services per period of time. Capital and labour services can be bought at constant prices per unit of Rs.3000 and Rs.2000 respectively. (a) Derive the returns to scale characteristics of the two production functions. (b) What is the capital to labour ratios for the two plants that minimizes the firms cost at any chosen output levels of two goods?

i) A multi - product firm produces two non - related products X and Y where production functions are given by Qx = L075K@5, Qy La5K@7. Qx and QY are quantities of outputs of X and Y per period of time andL and K are inputs of labour and capital services per period of time. Capital and labour services can be bought at constant prices per unit of Rs.3000 and Rs.2000 respectively. (a) Derive the returns to scale characteristics of the two production functions. (b) What is the capital to labour ratios for the two plants that minimizes the firms cost at any chosen output levels of two goods?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 9E

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