Asked by Maria Amavizca on May 23, 2024

verifed

Verified

A firm has the production function f(x, y)  20x3/5 y2/5.The slope of the firm's isoquant at the point (x, y)  (20, 40) is (pick the closest one)

A) 3.
B) 0.67.
C) 1.50.
D) 0.50.
E) 0.25.

Isoquant Slope

Represents the rate at which one input can be substituted for another input while keeping the level of production constant, in the study of production theory.

Production Function

A mathematical model that describes the relationship between inputs (like labor and capital) and the maximum output that can be produced with those inputs.

Input

Resources used in the production process to create goods or services.

  • Acquire knowledge on the interchangeability elasticity of inputs in manufacturing processes.
  • Comprehend the meaning and importance of technical rates of substitution in relation to input-output associations.
verifed

Verified Answer

BN
Breanna NicolleMay 23, 2024
Final Answer :
A
Explanation :
The slope of an isoquant is given by the marginal rate of technical substitution (MRTS), which is the ratio of the marginal product of one input to the marginal product of the other input. For a Cobb-Douglas production function like f(x,y)=x3/5y2/5f(x, y) = x^{3/5}y^{2/5}f(x,y)=x3/5y2/5 , the MRTS can be calculated by taking the partial derivatives of fff with respect to xxx and yyy , and then finding their ratio at the given point (20, 40).The partial derivative of fff with respect to xxx is 35x−2/5y2/5\frac{3}{5}x^{-2/5}y^{2/5}53x2/5y2/5 and with respect to yyy is 25x3/5y−3/5\frac{2}{5}x^{3/5}y^{-3/5}52x3/5y3/5 . At the point (20, 40), these derivatives are: ∂f∂x=35⋅20−2/5⋅402/5\frac{\partial f}{\partial x} = \frac{3}{5} \cdot 20^{-2/5} \cdot 40^{2/5}xf=53202/5402/5∂f∂y=25⋅203/5⋅40−3/5\frac{\partial f}{\partial y} = \frac{2}{5} \cdot 20^{3/5} \cdot 40^{-3/5}yf=52203/5403/5 The MRTS, which is the negative ratio of these derivatives ( −∂f/∂x∂f/∂y-\frac{\partial f/\partial x}{\partial f/\partial y}f/yf/x ), at (20, 40) gives a value closest to -3, making choice A the correct answer. This calculation involves substituting the values of xxx and yyy into the expressions for the partial derivatives, calculating each, and then finding their ratio. The negative sign indicates the trade-off direction between xxx and yyy .