Question: Suppose that a firm has the following production function: Q (K, L) = 2L K. a. If the price of labor is 2 and the

Suppose that a firm has the following production function:

Q (K, L) = 2L √K.

a. If the price of labor is 2 and the price of capital is 4, what is the optimal ratio of capital to labor?

b. For an output level of Q = 1000, how much of each input will be used?


Step by Step Solution

★★★★★

3.44 Rating (154 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

a Optimality requires that MP L MP K wr 24 MP L 2 K MP K LK MP L ... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

363-B-E-M-E (3622).docx

120 KBs Word File

Students Have Also Explored These Related Economics Questions!

Q:

Suppose that a firm has the following Cobb - Douglas production function: Q = 12K0.75L0.25. a. What must its long-run total cost curve look like? Its long-run average total cost curve? b. How do your...

Q:

A hat manufacturing firm has the following production function with capital and labor being the inputs: Q = min(4L, 7K)-that is it has a fixed-proportions production function. If w is the cost of a...

Q:

A firm has the following items on its balance sheet: Cash $ 20,000,000 Inventory $134,000,000 Notes payable to bank $ 31,500,000 Common Stock ($10 par; 1,000,000 shares outstanding) $ 10,000,000...

Q:

Suppose that you are given the following production function: Q = 100K 0.6L 0.4 Determine the marginal product of capital and the marginal product of labor when K = 25 and L = 100. 2- For each of the...

Q:

please answer Suppose a firm has the following production function: Q = 2K L. The marginal product of capital is 24, and the marginal product of labor is 2K. Assume that capital rents for $100 per...

Q:

A firm can employ capital(k) and labor(l) to produce output using the following production function: f (k, l) = 4k + l The price of capital is r = $8, and the price of labor is w = $4. (a) What input...

Q:

What is the difference in ownership between a sole proprietership, a partnership, and a corporation?

Q:

(E) Determine whether the rm has economies of scale, constant economies of scale, or diseconornies of scale. Briey explain your reason. (F) (Bonus Question) Show that every short-run average total...

Q:

Consider a profit-maximizing firm with the following production function: f (k, l) = k l The prices of the two inputs are equal to r = $4 and w = $2 , respectively. (a) What input combination should...

Q:

(E) Determine whether the rm has economies of scale, constant economies of scale, or diseconornies of scale. Briey explain your reason. (F) (Bonus Question) Show that every short-run average total...

Q:

Why do some corporations prefer to control their subsidiaries with less than full ownership?

Q:

4. The following transactions occurred during 2020: a. Axis Oil Company and Alan Oil Company jointly purchased a 1,500-acre lease in Oklahoma for $48,000. Axis has a 55% WI and Alan has a 45% WI....

Q:

. What do the hex color values 0 0 0 0 0 0 - FFFFFF , in pair increments of: 0 0 , 3 3 , 6 6 , 9 9 , CC , and FF represent?

Q:

A common measure of industry concentration is: A. Porters Five Forces. B. the PESTLE framework. C. the Herfindahl-Hirschman Index.

Q:

If Starbuckss marketing department estimates the income elasticity of demand for its coffee to be 1.75, how will looming fears of a recession (expected to decrease consumers incomes by 4 percent over...

Q:

You are a division manager at Toyota. If your marketing department estimates that the semiannual demand for the Highlander is Q = 100,000 1.25P, what price should you charge in order to maximize...

Q:

You are a manager in charge of monitoring cash flow at a company that makes photography equipment. Traditional photography equipment comprises 80 percent of your revenues, which grow about 2 percent...

Q:

The actual exchange rate is 1 7 . 3 1 MXN / USD . What should the price in pesos of the Corolla be in Monterrey to cost the same as in San Antonio after considering the exchange rate? Ignore taxes or...

Q:

Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown...

Q:

QUESTION 25 4 points Save Answer William invests $3,000 in a savings account. The account pays 4% interest compounded annually. How much money will be in the account at the end of the 8 years?...