For a producer under complete competition, the following production function applies. Q = F (K, L) = KL where Q is the size of production, K is the size of the capital investment and L is the amount of labor. Assume that the price of capital, r, is 5 and that the salary, w, is 10. a) Assume initially that the capital is locked at 4 units. How much labor will the producer use to produce 50 units of the final product? What will be the total cost of producing these 50 units? b) For the production function above applies The marginal product for work MPL = K The marginal product for capital MPK = L Enter the cost-minimizing combination of capital and labor in the production of 50 units. Also enter the size of the costs.
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For a producer under complete competition, the following production function applies.
Q = F (K, L) = KL
where Q is the size of production, K is the size of the capital investment and L is the amount of labor.
Assume that the price of capital, r, is 5 and that the salary, w, is 10.
a) Assume initially that the capital is locked at 4 units. How much labor will the producer use to produce 50 units of the final product? What will be the total cost of producing these 50 units?
b)
For the production function above applies
The marginal product for work MPL = K
The marginal product for capital MPK = L
Enter the cost-minimizing combination of capital and labor in the production of 50 units. Also enter the size of the costs.
c)
Write down the equation for the isocost line for the manufacturer
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