1 The figure below shows the production function for the Uni

1. The figure below shows the production function for the United States. Henry Ford introduces assembly line manufacturing a. Show what happens is likely to happen to the production function. b. All else the same, illustrate what will happen to the rental rate of capital after this discovery

Solution

It is seen that for additional one unit of Capital there is less than unit increase in output. It shows Diminishing Marginal returns .

Answer for 2

Rental rate of capital = R/P that is equal to Marginal Productivity of Capital it seems that MPK=R/P in this case

R is rental rate