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XYZ Corp. produces 1,000 units of output (along the same isoquant) using various combinations of capital (K) and labor (L). At point A (along the same isoquant), the firm uses 30 units of capital and 3 units of labor. When it moves to point B (along the same isoquant), it uses 12 units of capital and 6 units of labor. Based on this information, the firm's elasticity of input substitution (sigma) is? Hint: You may want to draw a graph of the firm's isoquant and identify points A and B (and their corresponding K/L combinations).

XYZ Corp. produces 1,000 units of output (along the same isoquant) using various combinations of capital (K) and labor (L). At point A (along the same isoquant), the firm uses 30 units of capital and 3 units of labor. When it moves to point B (along the same isoquant), it uses 12 units of capital and 6 units of labor. Based on this information, the firm's elasticity of input substitution (sigma) is? Hint: You may want to draw a graph of the firm's isoquant and identify points A and B (and their corresponding K/L combinations).

Microeconomic Theory
Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter11: Profit Maximization
Section: Chapter Questions
Problem 11.9P
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XYZ Corp. produces 1,000 units of output (along the same isoquant) using various combinations of capital (K) and labor (L). At point A (along the same isoquant), the firm uses 30 units of capital and 3 units of labor. When it moves to point B (along the same isoquant), it uses 12 units of capital and 6 units of labor. Based on this information, the firm's elasticity of input substitution (sigma) is? Hint: You may want to draw a graph of the firm's isoquant and identify points A and B (and their corresponding K/L combinations).
Transcribed Image Text:XYZ Corp. produces 1,000 units of output (along the same isoquant) using various combinations of capital (K) and labor (L). At point A (along the same isoquant), the firm uses 30 units of capital and 3 units of labor. When it moves to point B (along the same isoquant), it uses 12 units of capital and 6 units of labor. Based on this information, the firm's elasticity of input substitution (sigma) is? Hint: You may want to draw a graph of the firm's isoquant and identify points A and B (and their corresponding K/L combinations).
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