Question: Given a production function for a firm, Q = 80K 0.8 L= 0.6 , price of capital = $ 50, price of labour = $40

Given a production function for a firm, Q = 80K^0.8L=^0.6 , price of capital = $ 50, price of labour = $40

a.Explain the production elasticity of labour and capital for this firm. Which input is more productive?

b.Calculate the current output of the firm if it uses 10 capitals and 25 labours?

c.What should be the optimal combination of labour and capital to employ if they want to produce the present amount of output? How much is the total cost incurred?

d.Show the optimum condition in a diagram of isocost and isoquant.

e.State whether the firm is experiencing increasing, decreasing or constant returns to scale?

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