1) Suppose the wage is $12 and the cost of capital is $3, and we have the following production function: Q=L0.5K0.5 a) Find your cost minimizing level of K and L if Q=10. b) What is your long run cost in a? c) Draw a graph that shows the isoquant and isocost that minimizes costs. d) Suppose the cost of capital increases. How will the level of K and L and the graph change? Draw it. e) Calculate the marginal rate of technical substitution.
1) Suppose the wage is $12 and the cost of capital is $3, and we have the following production function: Q=L0.5K0.5 a) Find your cost minimizing level of K and L if Q=10. b) What is your long run cost in a? c) Draw a graph that shows the isoquant and isocost that minimizes costs. d) Suppose the cost of capital increases. How will the level of K and L and the graph change? Draw it. e) Calculate the marginal rate of technical substitution.
Algebra and Trigonometry (6th Edition)
6th Edition
ISBN:9780134463216
Author:Robert F. Blitzer
Publisher:Robert F. Blitzer
ChapterP: Prerequisites: Fundamental Concepts Of Algebra
Section: Chapter Questions
Problem 1MCCP: In Exercises 1-25, simplify the given expression or perform the indicated operation (and simplify,...
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Please help solve 1 a, b, c, d, and e. As they are all related please.
Transcribed Image Text:1) Suppose the wage is $12 and the cost of capital is $3, and
we have the following production function: Q=LK.
a) Find your cost minimizing level of K and L if Q=10.
b) What is your long run cost in a?
c) Draw a graph that shows the isoquant and isocost that
minimizes costs.
d) Suppose the cost of capital increases. How will the level
of K and L and the graph change? Draw it.
e) Calculate the marginal rate of technical substitution.
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VIEWStep 4: Drawing a graph that shows the isoquant and Isocost that minimizes costs.
VIEWStep 5: Drawing the level of K and L with graph
VIEWStep 6: Calculating the marginal rate of technical substitution.
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