A firm produces output (y) using two inputs, labor (L) and capital (K), according to the following Cobb-Douglas production function: y = f(L, K) = Lº25 K0.75.
A firm produces output (y) using two inputs, labor (L) and capital (K), according to the following Cobb-Douglas production function:
y = f(L, K) = Lº25 K0.75.
Assuming that we draw the isoquant map with labor on the horizontal axis and capital on the vertical axis, what is the slope of this firm's isoquant when L = 120 and K = 60? Give your answer to two decimal places and remember that the sign matters when describing the slope of an isoquant.[_____________]
Part 2 : See Hint Assume that L = 120 and K = 60 and suppose that the firm decides to reduce its use of capital and replace those machine hours with some additional labor hours. Approximately how many labor hours will the firm need to add for each machine hour it cut in order to maintain the same level of output (i.e., stay on the same isoquant)? Give your answer to two decimal places. [__________] labor hours
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