Question: 7.28. A plants production function is Q ! 2KL K. For this production function, MPK ! 2L 1 and MPL ! 2K. The

7.28. A plant’s production function is Q ! 2KL " K.

For this production function, MPK ! 2L " 1 and MPL !

2K. The price of labor services w is $4 and of capital services r is $5 per unit.

a) In the short run, the plant’s capital is fixed at K ! 9.

Q ! 10KL K. 1 3.

Find the amount of labor it must employ to produce Q !

45 units of output.

b) How much money is the firm sacrificing by not having the ability to choose its level of capital optimally?

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