please type you question here. Thanks a lot. Question 1. (20 marks) Firm 1 and F

Question

please type you question here. Thanks a lot.

Question 1. (20 marks) Firm 1 and Firm 2 use the same type of production function, Q-f(K, L) where Q= quantity of production K= amount of capital input amount of labour input. However, Firm 1 is only 90% as productive as Firm 2 whereas Firm 2 is fully productive. At a particular level of inputs, a) Does the marginal product of labour differ between the firms? Show your work. (5 marks) b) Does the marginal product of capital differ between the firms? Show your work. (5 marks) c) Does the marginal rate of technical substitution differ between the firms? Show your work. (5 marks) d) Assume that the given production function exhibits the decreasing marginal productivity. Draw the isoquant curves for Firm 1 and Firm 2 in the same diagram. You must label the quantity levels for each firm appropriately (5 marks)

Explanation / Answer

Proposition-There is a unique subgame perfect equilibrium in the sequential bargaining game described as follows. Whenever player one proposes, she suggests a split (x,1 x) with x =(12)/(1 12). Player two accepts any division giving her at least 1 x. Whenever player two proposes, she suggests a split (y,1 y) with y = 1(1 2)/(112). Player one accepts any division giving her at least y. Thus, bargaining ends immediately with a split (x,1 x).

By given proposition

Solution-Subgame perfect equilibrium

A= 1- Beta/1- (alpha)(beta)

B=1-Beta/1-(alpha)(beta)

Both have the same payoff whatever time period.

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