Use the tangency rule to determine the cost-minimizing bundles of labor and capital for a general Cobb-Douglas production function, \(q=A L^{a} K^{b}\), and for the specific beer production function that underlies Figure 7.5, \(q=1.516 L^{0.6} K^{0.4}\), where \(w=24\) and \(r=8\).

Data From Figure 7.5:-

Transcribed Image Text:

K, Units of capital per hour q= 100 isoquant $3,000 Isocost 303 $2,000 Isocost 100 27 0 $1,000 Isocost x 24 50 50 116 L, Units of labor per hour