Consider a firm with production function in the Cobb-Douglas form q = K^.5L^.5 Suppose that one unit of capital costs r=12.5, whereas one unit of labor costs w=8. Determine the optimal input mix that leads to an output of q = 2. Determine the firm’s cost function, that is, the minimum cost required to produce output q.
Consider a firm with production function in the Cobb-Douglas form q = K^.5L^.5 Suppose that one unit of capital costs r=12.5, whereas one unit of labor costs w=8. Determine the optimal input mix that leads to an output of q = 2. Determine the firm’s cost function, that is, the minimum cost required to produce output q.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter7: Production Economics
Section: Chapter Questions
Problem 6E
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Consider a firm with production function in the Cobb-Douglas form
q = K^.5L^.5
Suppose that one unit of capital costs r=12.5, whereas one unit of labor costs w=8.
- Determine the optimal input mix that leads to an output of q = 2.
- Determine the firm’s cost function, that is, the minimum cost required to produce output q.
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