Question
(5 points) If input prices are w = 4, and r = 1, and q = 4K .25 L .75, what is the leastcost input
(5 points) If input prices are w = 4, and r = 1, and q = 4K .25 L .75, what is the leastcost input combination required to produce 40 units of output? Calculate the total cost. M PK = K .75 L .75 M PL = K .25 L .25 (b) (5 points) Suppose instead that capital was fixed at 16 units. What would be the implications for labor usage and total cost? (c) (5 points) Suppose the government, in an effort to increase employment, offers firms in this industry a $1 subsidy per unit of labor. How would this affect input usage (assume q = 60)? How is this likely to affect employment in the capital goods (K) industry in the long-run?
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