Question One a. The Mature Corporation produces yo-yos at its factory. Both its labor and capital markets are competitive. Wages are K12 per hour and yo-yo-making equipment (a computer controlled plastic extruding machine) rents for K4 per hour. The production function is q = 40K 0.25L 0.75, where q = boxes of yo-yos per week, K = hours of yo-yo equipment used, and L = hours of labor. i Determine the cost minimizing capital-labor ratio at this firm. ii Determine the amount of labour used in production as a function of q. b. Briefly explain factor that contribute to frictional unemployment in the economy. c. Explain why a Marginal factor cost (MFC = W) is perfectly elastic in a perfect competitive industry? d. Explain why internal markets for labor are every important for a firm?
Question One
a. The Mature Corporation produces yo-yos at its factory. Both its labor and capital markets are competitive. Wages are K12 per hour and yo-yo-making equipment (a computer controlled plastic extruding machine) rents for K4 per hour. The production function is q = 40K 0.25L 0.75, where q = boxes of yo-yos per week, K = hours of yo-yo equipment used, and L = hours of labor.
i Determine the cost minimizing capital-labor ratio at this firm.
ii Determine the amount of labour used in production as a function of q.
b. Briefly explain factor that contribute to frictional
c. Explain why a Marginal factor cost (MFC = W) is perfectly elastic in a
d. Explain why internal markets for labor are every important for a firm?
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