11. Q = 6L - 0.1L2 + 4 K - 0.2 K2 The wage rate is $30, the cost of capital is $40, and output sells for $50. a) In the short run, capital is fixed at 5 units. How much labor do you recommend? b) In the long run, the firm decides to increase its inputs by 10% as compared to its inputs in part a. What do you conclude about returns to scale?
11. Q = 6L - 0.1L2 + 4 K - 0.2 K2 The wage rate is $30, the cost of capital is $40, and output sells for $50. a) In the short run, capital is fixed at 5 units. How much labor do you recommend? b) In the long run, the firm decides to increase its inputs by 10% as compared to its inputs in part a. What do you conclude about returns to scale?
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter7: Production, Inputs, And Cost: Building Blocks For Supply Analysis
Section: Chapter Questions
Problem 7TY
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11. Q = 6L - 0.1L2 + 4 K - 0.2 K2 The wage rate is $30, the cost of capital is $40, and output sells for $50. a) In the short run, capital is fixed at 5 units. How much labor do you recommend? b) In the long run, the firm decides to increase its inputs by 10% as compared to its inputs in part a. What do you conclude about returns to scale?
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