Question: A software firm's production function is Q = 2LK2 . The price of labour services w is $40 and of capital services, r is $100

A software firm's production function is Q = 2LK2 . The price of labour services w is $40 and of capital services, r is $100 per unit.

a) In the short run, the firm's capital is fixed at K = 5. Compute the amount of labour that should be hired to produce Q = 100 units of output and short-run total cost.

b) How much money is the firm losing by not having the ability to choose its level of capital optimally? (Hint: You can round off your answers to the nearest whole number).

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