Question
A profit maximizing firm produces output using capital,K,andlabour, L,in the followingproduction technology: Y = 2*K^0.5*L^0.5 The cost function of the firm is: C = w*L
A profit maximizing firm produces output using capital,K,andlabour, L,in the followingproduction technology:
Y = 2*K^0.5*L^0.5
The cost function of the firm is: C = w*L + r*K
where r=0.7.
You are told thatthe firm employs L = 7 workers.
Find the optimal capital stock, K*.
(State your answer to 2 decimal places.)
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Intermediate Microeconomics and Its Application
Authors: walter nicholson, christopher snyder
11th edition
9781111784300, 324599102, 1111784302, 978-0324599107
