Question
A (fake) firm makes shirts according to production function Q = L .8 K .2 .The firm is employing 100 units of labor for $1
A (fake) firm makes shirts according to production functionQ = L.8K.2.The firm is employing 100 units of labor for $1 each and 100 units of capital for $2 each.(Capital and labor are the only costs for the firm.)Each shirt is sold to buyers for $15.
a) Calculate this firm's total units of production.
b) Calculate this firm's average cost of production.
c) Calculate this firm's total profits.
d) Calculate the marginal product of labor and the marginal product of capital.
e) Is this firm producing its shirts in the least costly manner? Answer YES or NO, and support your answer with calculations.
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