Question
Suppose the production function for Macbook is q=f(K, L)=K^1.5+L^1.5. a) Calculate the marginal product of K and the marginal product of L when K=12 and
Suppose the production function for Macbook is q=f(K, L)=K^1.5+L^1.5. a) Calculate the marginal product of K and the marginal product of L when K=12 and L=100. b) Calculate the RTS when K=12 and L=100. Assume that the isoquant is drawn with L on the x-axis. c) Now assume the firm is in a long run situation where both capital (K) and labor (L) are variable. Price for each Macbook is $1000 (p=1000), the wage rate is $500 (w=500) and the rental price for capital is $1500 (r=1500). Given those output prices and input prices, what is the profit maximizing input level of K and L (K* & L*) in long run?
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