Question 8: Profit maximizationA firm's short-run production function is given with Q(K, L) = L0.2 K² . Capital isfixed with K = 3. The price of capital is r = 0.1 and the price of labour is w = 4.The price of the final output is p = 8.a) Do you think it is possible to depict this production function with an isoquant?Justify your answer by explaining the concept of an isoquant.b) Calculate the optimum quantity of labour the firm should use if it wants tomaximize its profit. Also calculate the output produced and the correspondingprofit.

a) An isoquant is the set of all the combinations of inputs which yield the same level of output.…

Answered: Question 8: Profit maximization A…

ENGR.ECONOMIC ANALYSIS

14th Edition

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Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Assume a firm has the following short-run production function: q(L) = L + 2L² ), what is the lowest level of labor ( ) they would employ? Given the production function above, answer the following two questions: A) If this firm is going to maximize profits in the short-run by producing a strictly positive level of output ( Minimum level of labor = ) a wage of $10 ( 9>0 ), what must be the price ( L B) Now suppose the firm must pay each unit a labor ( Price = dollars L w = 10 - ). If this firm is maximizing their profits in the short-run by hiring 4 units of labor ( -L³ L = 4 3 Р ) that they can charge for each unit of output they produce?
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Covmed produces an antiviral drug to treat COVID-19 as its single output. We are in the short-run, meaning Covmed's capital is fixed at K¯=100. The input prices for capital and labor are r=8 and w=20, respectively. Covmed's (short-run) production function is f(K¯,L)=K¯+2L−100=2L. a) Derive Covmed's cost function C(Q). What is Covmed's fixed cost FC and variable cost VC(Q)?
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In the short run, a firm cannot vary its capital, K=2, but it can vary its labor, L. It produces output, q. You are given two production functions. (a) q = 10L + K MPL = 10 (b) q = L0.5K0.5 For each production function, please determine whether the production function will show diminishing marginal product (diminishing marginal returns) as labor increases. You must give an explanation for each answer. (Note: Diminishing returns of labor refer to the decrease in marginal product of labor as the quantity of labor increases).
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Assume the following production function: q = √k + √la) Determine the cost function and the contingent input demand functions. b) If the firm’s output target is 1000 units and the prices per unit of capital and labour are 30 and 10, respectively, what will the firm’s cost be? What will its demand for capital and labour, respectively, be? c) Determine the rate of technical substitution and sketch the isoquant map corresponding to the production function.

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