Question: I. Let the production function be given by Q =KL. Rental price of capital is 2 USD, hourly wage paid to workers is1 USD. Hint:

I. Let the production function be given by Q =KL. Rental price of capital is 2 USD, hourly wage paid to workers is1 USD.

Hint: this computation represents cost minimization instead of production maximization. It differs only in the following: After compution MRTS instead of subtituting it into izocost you substitute it into production function.

a) How much K and L is employed in the efficient production of 32 units of output?

b) What is the minimum cost of producing 32 units of output?

c) Show your results graphically.

II.Suppose production function in the short run is described as follows:

Q= 6L² - 0.4L³

Capital is fixed at size K=10.

a) compute marginal product of labor

b) find the value of L that maximizes marginal product of labor

c) compute average product of labor

d) find the value of L that maximizes average product of labor

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