(a)You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w (price of labor) = $40, r (price of capital) = $100, MP_L = 20, and MP_K = 40 is the firm minimizing cost? Please explain and show any calculations.

(b)The production function for a competitive firm is Q = K^0.5L^0.5. The firm sells its output at a price of $10 and can hire labor at a wage of $5.

Marginal Product of labor =

Capital is fixed at 25 units. What is the profit-maximizing quantity of labor? Please show your calculations.

2.

There are over 5,000 banks in the United Statesmore than 10 times more per person than in other industrialized countries. A recent study suggests that the long-run average cost curve for an individual bank is relatively flat. If Congress took steps to consolidate banks (merge some of the banks), thereby reducing the total number to 2,500, what would you expect to happen to average costs within the banking industry? (a)You are an efficiency expert hired by a manufacturing firm that uses K and L as inputs. The firm produces and sells a given output. If w (price of labor) = $40, r (price of capital) = $100, MP_L = 20, and MP_K = 40 is the firm minimizing cost? Please explain and show any calculations.

(b)The production function for a competitive firm is Q = K^0.5L^0.5. The firm sells its output at a price of $10 and can hire labor at a wage of $5.

Marginal Product of labor =

Capital is fixed at 25 units. What is the profit-maximizing quantity of labor? Please show your calculations.

2.(10 points)

There are over 5,000 banks in the United Statesmore than 10 times more per person than in other industrialized countries. A recent study suggests that the long-run average cost curve for an individual bank is relatively flat. If Congress took steps to consolidate banks (merge some of the banks), thereby reducing the total number to 2,500, what would you expect to happen to average costs within the banking industry? Please explain.

.