Consider a market where the price of labor is 2 and the price of a unit of

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Consider a market where the price of labor is 2 and the price of a unit of capital is 1. A firm has the following production function Q = sqrt(K) + sqrt(L) where K is the amount of capital the firm uses and L is labor.

1) What’s the marginal rate of technical substitution for this firm at any combination of L and K?

2) Show that the cost minimizing combination of labor and capital for this firm has 4 times as much capital as it does labor.

Related Book For answer-question

Applied Statistics in Business and Economics

ISBN: 978-0073521480

4th edition

Authors: David Doane, Lori Seward

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Posted Date: Nov 13, 2022 06:43 AM

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Consider a market where the price of labor is 2 and the price of a unit of

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Step 13 Production function is Q KL Given Price of Labor PL 2 Price of Ca... View the full answer

Applied Statistics in Business and Economics

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