Here is the production function for our local brewery's best-selling Halloween pumpkin beer: q = 100L0.5K0.6 Current wages (w) are $12 and the cost of capital (r) is $4. 1. Calculate the brewery's marginal rate of technical substitution (MRTS). 2. If the brewery is currently using 50 units of labor (L) how much capital should they use?

Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter7: Production And Cost In The Firm
Section7.A: Appendix: A Closer Look At Production And Cost
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Question 2 Long-run costs
Here is the production function for our local brewery's best-selling Halloween
pumpkin beer:
q = 100L0.5K0.6
Current wages (w) are $12 and the cost of capital (r) is $4.
1. Calculate the brewery's marginal rate of technical substitution (MRTS).
2. If the brewery is currently using 50 units of labor (L) how much capital should
they use?
Transcribed Image Text:Question 2 Long-run costs Here is the production function for our local brewery's best-selling Halloween pumpkin beer: q = 100L0.5K0.6 Current wages (w) are $12 and the cost of capital (r) is $4. 1. Calculate the brewery's marginal rate of technical substitution (MRTS). 2. If the brewery is currently using 50 units of labor (L) how much capital should they use?
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