A firm produces output according to the production function Q = F (K, L) = 4K +

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A firm produces output according to the production function Q = F (K, L) = 4K + 8L.

a. How much output is produced when K = 2 and L = 3?

b. If the wage rate is $ 60 per hour and the rental rate on capital is $ 20 per hour, what is the cost- minimizing input mix for producing 32 units of output?

c. How does your answer to part b change if the wage rate decreases to $ 20 per hour but the rental rate on capital remains at $ 20 per hour?

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Managerial Economics and Business Strategy

ISBN: 978-0073523224

8th edition

Authors: Michael Baye, Jeff Prince

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Question Posted: Apr 18, 2014 09:03 AM

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A firm produces output according to the production function Q = F (K, L) = 4K +

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a With K 2 and L 3 Q 32 b Since the MRTS KL is 84 2 that means a company can trade two uni...View the full answer

Managerial Economics and Business Strategy

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