Consider a general Cobb-Douglas production function q= LK, and assume the firm produces q-qo. Which of the following is NOT TRUE? (hint: you can answer this question purely with graphs) If the production level qo increases, both, labor used (L) and capital used (K*) will increase. O If only the price of labor doubles and the price of capital remains at its initial level, the use of labor (L*) increases and the use of capital (K*) decreases. O None of the above. If only the price of capital doubles and the price of labor remains at its initial level, the use of labor (L') increases and the use of capital (K*) decreases. O If the price of capital and the price of labor both double, the cost-minimizing input quantities L* K* do not change.

Consider a general Cobb-Douglas production function q= LK, and assume the firm produces q-qo. Which of the following is NOT TRUE? (hint: you can answer this question purely with graphs) If the production level qo increases, both, labor used (L) and capital used (K) will increase. O If only the price of labor doubles and the price of capital remains at its initial level, the use of labor (L) increases and the use of capital (K) decreases. O None of the above. If only the price of capital doubles and the price of labor remains at its initial level, the use of labor (L') increases and the use of capital (K) decreases. O If the price of capital and the price of labor both double, the cost-minimizing input quantities L* K* do not change.

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 7E

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