Suppose that a firm’s production function is q =10L0.5K0.5 (i.e. q = 10√L√K). The cost of a unit of labour is €20 and the cost of a unit of capital is €80. The firm wants to produce 80 units of output. The marginal rate of technical substitution is K/L The optimal level of capital required to produce 80 units of output is A. 16 B. 8 C. 4 D. 2

Suppose that a firm’s production function is q =10L0.5K0.5 (i.e. q = 10√L√K). The cost of a unit of labour is €20 and the cost of a unit of capital is €80. The firm wants to produce 80 units of output. The marginal rate of technical substitution is K/L The optimal level of capital required to produce 80 units of output is A. 16 B. 8 C. 4 D. 2

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.4P

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