2. Suppose the firm is producing using q = f(KL) = (3/2)K^(1/3) L^(2/3) where q = a firm's output, K capital, and L = labour. K)) a) Find the short run labour choice L* when capital is fixed K = 64 units. If the wage rate w = $8, the rental rate of capital r = $4, and the price P = $4, then how much does the firm produce, i.e. what is q? b) Suppose the firm decides to adjust their ratio of capital and labour. What is the optimal K* and L* for the firm to use in their production, i.e. what is the firm's long run choice given w = $8, r = $4, P = $4, and Q = 24 c) Suppose the government decides to enact a minimum wage of W = $16, then explain how this would change the firm's behaviour in part (b) using a graph
2. Suppose the firm is producing using q = f(KL) = (3/2)K^(1/3) L^(2/3) where q = a firm's output, K capital, and L = labour. K)) a) Find the short run labour choice L* when capital is fixed K = 64 units. If the wage rate w = $8, the rental rate of capital r = $4, and the price P = $4, then how much does the firm produce, i.e. what is q? b) Suppose the firm decides to adjust their ratio of capital and labour. What is the optimal K* and L* for the firm to use in their production, i.e. what is the firm's long run choice given w = $8, r = $4, P = $4, and Q = 24 c) Suppose the government decides to enact a minimum wage of W = $16, then explain how this would change the firm's behaviour in part (b) using a graph
Chapter1: Making Economics Decisions
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Transcribed Image Text:2. Suppose the firm is producing using q = f(KL) = (3/2)K^(1/3) L^(2/3) where q = a firm's output, K capital, and L =
labour. K)) a) Find the short run labour choice L* when capital is fixed K = 64 units. If the wage rate w = $8, the rental
rate of capital r = $4, and the price P = $4, then how much does the firm produce, i.e. what is q? b) Suppose the
firm decides to adjust their ratio of capital and labour. What is the optimal K* and L* for the firm to use in their
production, i.e. what is the firm's long run choice given w = $8, r = $4, P = $4, and Q = 24 c) Suppose the
government decides to enact a minimum wage of W = $16, then explain how this would change the firm's behaviour in
part (b) using a graph
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