1. A firm’s production function is Q = L1/2 K1/2 They have 16 units of capital (which is fixed in the short-run). The unit cost of labour is 2 and the unit cost of capital is 4. They receive an order of 4. a) Use the Lagrangian method to calculate the optimal choice of inputs used to fulfil the order in the long-run

1. A firm’s production function is Q = L1/2 K1/2 They have 16 units of capital (which is fixed in the short-run). The unit cost of labour is 2 and the unit cost of capital is 4. They receive an order of 4. a) Use the Lagrangian method to calculate the optimal choice of inputs used to fulfil the order in the long-run

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Cost Of Production

Section: Chapter Questions

Problem 4QR

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1. A firm’s production function is

Q = L^1/2 K^1/2

They have 16 units of capital (which is fixed in the short-run). The unit cost of labour is 2 and the unit cost of capital is 4. They receive an order of 4.

a) Use the Lagrangian method to calculate the optimal choice of inputs used to fulfil the order in the long-run.

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