A firm produces output according to a production function Q = F (K, L) = min {4K, 8L}.
a. How much output is produced when K = 2 and L = 3?
b. If the wage rate is $ 60 per hour and the rental rate on capital is $ 20 per hour, what is the cost- minimizing input mix for producing 8 units of output?
c. How does your answer to part b change if the wage rate decreases to $ 20 per hour but the rental rate on capital remains at $ 20 per hour?

Question

A firm produces output according to a production function Q = F (K, L) = min {4K, 8L}. 
a. How much output is produced when K = 2 and L = 3? 
b. If the wage rate is $ 60 per hour and the rental rate on capital is $ 20 per hour, what is the cost- minimizing input mix for producing 8 units of output? 
c. How does your answer to part b change if the wage rate decreases to $ 20 per hour but the rental rate on capital remains at $ 20 per hour?

	Capital and labor increase.
	Capital decreases and labor increases.
	It does not change.
	Capital increases and labor decreases.

	Capital and labor increase.
	Capital decreases and labor increases.
	Capital increases and labor decreases.
	It does not change.

Unlock all answers

Related textbook solutions

Principles of Economics

Principles of Macroeconomics

Principles of Microeconomics

Related questions

Weekly leaderboard