Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Assume that a production function is Q=K^0.01 x L^0.99. Let the cost of capital r=1,000,000 and the wage w=1. Should the firm use any capital
Assume that a production function is Q=K^0.01 x L^0.99. Let the cost of capital r=1,000,000 and the wage w=1. Should the firm use any capital to produce as it contributes so little to output and is so much more expensive than labor? Explain. Note that it is unnecessary to solve for the actual levels of K and L as you did in the preceding question.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started