A profit maximizing firm produces output using capital, K, and labour, L, in the following production technology: Y = 2*K^0.5*L^0.5 The rental rate of capital is r=0.10. What is the capital-labour ratio of the firm?

A profit maximizing firm produces output using capital, K, and labour, L, in the following production technology: Y = 2K^0.5L^0.5 The rental rate of capital is r=0.10. What is the capital-labour ratio of the firm?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Explicit and Implicit Cost Analysis

The entire idea of the cost of production or production cost is applied corresponding or we can say that it is related to money cost. Money cost refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factors of production or factor services.

Question

A profit maximizing firm produces output using capital, K, and labour, L, in the following production technology:

Y = 2*K^0.5*L^0.5

The rental rate of capital is r=0.10. What is the capital-labour ratio of the firm?

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