Problem
Suppose that a firm's production function is given by Q = KL + K, with MPK = L + 1 and MPL = K. At point A, the firm uses K = 3 units of capital and L = 5 units of labor. At point B, along the same isoquant, the firm would only use 1 unit of capital.
a) Calculate how much labor is required at point B.
b) Calculate the elasticity of substitution between A and B. Does this production function exhibit a higher or lower elasticity of substitution than a Cobb-Douglas function over this range of inputs?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.