The following production function describes the production of buttons made of plastic: q = (4K0.5 +L0.5) with K ... machinery, L ... labor. Rents for capital are r = 10000€, each worker costs 5000€ a month. a) Will a labor-capital ratio of 2.5 minimize total production costs in the long run?

The following production function describes the production of buttons made of plastic: q = (4K0.5 +L0.5) with K ... machinery, L ... labor. Rents for capital are r = 10000€, each worker costs 5000€ a month. a) Will a labor-capital ratio of 2.5 minimize total production costs in the long run?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.7P

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Question

The following production function describes the production of buttons made of plastic:
q = (4K0.5 +L0.5) with K ... machinery, L ... labor. Rents for capital are r = 10000€,
each worker costs 5000€ a month.
a) Will a labor-capital ratio of 2.5 minimize total production costs in the long run?

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