Consider the production function Q = (0.5K1/3 + 0.5L1/3)3 with a corresponding MRTS = K2/3/L2/3. a. Prove that this production function exhibits constant returns to scale. b. Suppose the firms want to minimize the cost of producing 8 units of output. It pays a wage rate W of $40 and capital cost R of $10. How many units of labor and capital should the firm use?
Consider the production function Q = (0.5K1/3 + 0.5L1/3)3 with a corresponding MRTS = K2/3/L2/3. a. Prove that this production function exhibits constant returns to scale. b. Suppose the firms want to minimize the cost of producing 8 units of output. It pays a wage rate W of $40 and capital cost R of $10. How many units of labor and capital should the firm use?
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.7P
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Consider the production function Q = (0.5K1/3 + 0.5L1/3)3 with a corresponding
a. Prove that this production function exhibits constant returns to scale.
b. Suppose the firms want to minimize the cost of producing 8 units of output. It pays a wage rate W of $40 and capital cost R of $10. How many units of labor and capital should the firm use?
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