Compute the marginal products associated

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Where T is the number of seat-miles produced annually, K is capital, L is labor, and F is fuel.

a. If currently American employs K=100, L=500, and F=20,000, compute the marginal products associated with K, L, F.

b. Illustrate what is American's MRTS between K and L? MRTS between K and F? Should American try to ensure that all its MRTSs are equal? Explain.

c. Does American's production function exhibit constant, increasing, or decreasing returns to scale? Explain. How would your answer change if c=-0.2?

d. Does the law of diminishing returns imply decreasing returns to scale? Explain

Reference no: EM1347883

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