ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Suppose that a firm's production function is:
q=10L0.50.5
Its marginal product functions are:
and
MPL = 5K0.5/0.5 = 0.5q/L
MPK-5L0.50.5
=0.5q/K.
The cost of a unit of labor, w, is $50 and the cost of a unit of capital, r, is $50. Isoquants for output of 140 and
280 are illustrated in the figure to the right.
Initially, the firm is producing 140 units of output and has determined that the cost-minimizing quantities of
labor and capital are 14 and 14, respectively.
Suppose now that the firm wants to increase output to 280 units. If capital is fixed in the short run, how much
labor will the firm require?
The firm will now require 56.00 units of labor. (Enter your response rounded to two decimal places.)
K
If the marginal rate of technical substitution is find the optimal level of capital and labor required to
produce the 280 units of output.
The optimal level of capital is units and the optimal level of labor is ☐ units. (Enter your responses as
integers.)
K, Units of capital
112
98-
84-
70-
56-
42-
28-
14-
0
14
28
42
56 70
84
L, Units of labor
4-280
q=140
98 112
□ □ ☑
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Transcribed Image Text:Suppose that a firm's production function is: q=10L0.50.5 Its marginal product functions are: and MPL = 5K0.5/0.5 = 0.5q/L MPK-5L0.50.5 =0.5q/K. The cost of a unit of labor, w, is $50 and the cost of a unit of capital, r, is $50. Isoquants for output of 140 and 280 are illustrated in the figure to the right. Initially, the firm is producing 140 units of output and has determined that the cost-minimizing quantities of labor and capital are 14 and 14, respectively. Suppose now that the firm wants to increase output to 280 units. If capital is fixed in the short run, how much labor will the firm require? The firm will now require 56.00 units of labor. (Enter your response rounded to two decimal places.) K If the marginal rate of technical substitution is find the optimal level of capital and labor required to produce the 280 units of output. The optimal level of capital is units and the optimal level of labor is ☐ units. (Enter your responses as integers.) K, Units of capital 112 98- 84- 70- 56- 42- 28- 14- 0 14 28 42 56 70 84 L, Units of labor 4-280 q=140 98 112 □ □ ☑
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