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28 Sep 2019
4. (8 points) Assume that a firm has the following production function: q = f(K,L). Further assume that the isoquants for this function are convex. The wage rate is $4/hour, and the rental rate is $6/hour. a. (4 pts) In the LR, the firm produces its output where the marginal product of labor is 8, and the marginal product of capital is 9. Is the firm producing its output in an economically efficient manner? Why or why not? b. (4 pts) Should the firm change its input mix? If so, should they use more L (and less K) or more K (and less L)?
4. (8 points) Assume that a firm has the following production function: q = f(K,L). Further assume that the isoquants for this function are convex. The wage rate is $4/hour, and the rental rate is $6/hour. a. (4 pts) In the LR, the firm produces its output where the marginal product of labor is 8, and the marginal product of capital is 9. Is the firm producing its output in an economically efficient manner? Why or why not? b. (4 pts) Should the firm change its input mix? If so, should they use more L (and less K) or more K (and less L)?
Mahe AlamLv10
28 Sep 2019
