A production function has two inputs, K and L. At the current time, at the current level of output, Mp(L) = 60 and MP(K)= 30; the price of L is $20/unit-hour and the price of K is $5/unit. a. is the current combination of K and L optimal? How do you know? b. If it is optimal, what is the MP per dollar spent on K? If it is NOT optimal, how should you change your purchases of K and L to reach the cost minimum? Explain.

A production function has two inputs, K and L. At the current time, at the current level of output, Mp(L) = 60 and MP(K)= 30; the price of L is $20/unit-hour and the price of K is $5/unit. a. is the current combination of K and L optimal? How do you know? b. If it is optimal, what is the MP per dollar spent on K? If it is NOT optimal, how should you change your purchases of K and L to reach the cost minimum? Explain.

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: The Markets For The Factor Of Production

Section: Chapter Questions

Problem 9PA

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