Reference no: EM133599700

Question: There are two companies producing mugs, Ceramic and Tile. The production 0.5 0.5 function of mugs for Ceramic is given by ?? = 10? ? and Tile's production function of 0.6 0.5 mugs is given by ?? = 20? ? , where ? is hours of machine time and ? is hours of labour employed. a) Using a graph show how, ceteris paribus, an improvement in technology would affect Ceramic's production function. b) If both companies use the same amount of capital and labour, which one generates more output? Explain. c) Find the marginal product of capital and the marginal product of labour for each company. d) Assume that ? = ? = 2,000. Which company will benefit the most from increasing its labour? Which company will benefit the most from increasing its capital? Why? e) Show what type of returns to scale is each company exhibiting.