Suppose that a firm has production function f(K, L) = K2a + Lª where a > 1. Assume that PK = PLwhere pk is the price of capital per unit and på is the price of labour per unit. If the firm isproducing at an optimal point then which of the following can we conclude?The firm will use equal quantities of capital and labour.The firm will use twice as much capital as labour.O The marginal rate of technical substitution will equal the price ratio.O The firm will only use capital in production.O More than one of the above.

We must examine the conditions necessary for profit maximization in a firm's production in order to…

Suppose that a firm has production function ƒ(K, L) = K2a + Lª where a > 1. Assume that pk = PL where pk is the price of capital per unit and pL is the price of labour per unit. If the firm is producing at an optimal point then which of the following can we conclude? O The firm will use equal quantities of capital and labour. The firm will use twice as much capital as labour. The marginal rate of technical substitution will equal the price ratio. The firm will only use capital in production. More than one of the above.

Suppose that a firm has production function ƒ(K, L) = K2a + Lª where a > 1. Assume that pk = PL where pk is the price of capital per unit and pL is the price of labour per unit. If the firm is producing at an optimal point then which of the following can we conclude? O The firm will use equal quantities of capital and labour. The firm will use twice as much capital as labour. The marginal rate of technical substitution will equal the price ratio. The firm will only use capital in production. More than one of the above.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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