A firm’s production is represented by the following function: Q = L1/4 K3/4 . The rental rate of capital (r) is $40 and the wage rate (w) is $12.a. For a given level of output, what should be the ratio of capital to labor in order to minimize costs?b. How much capital and labor should be used to produce 400 units of output? What is the total cost?c. What is the short run total cost if output is decreased to 300 units?d. How would the capital labor choice and total cost change in the long run?e. Would the firm prefer to relocate if input prices are r = 60 and w = 8 at an alternativelocation assuming relocation is costless? 12. A firm's production is represented by the following function: Q = L¹/4 K³/4. The rentalrate of capital (r) is $40 and the wage rate (w) is $12.a.For a given level of output, what should be the ratio of capital to labor in order tominimize costs?b.How much capital and labor should be used to produce 400 units of output? Whatis the total cost?C.What is the short run total cost if output is decreased to 300 units?d. How would the capital labor choice and total cost change in the long run?e. Would the firm prefer to relocate if input prices are r = 60 and w=8 at an alternativelocation assuming relocation is costless?

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A firm’s production is represented by the following function: Q = L1/4 K3/4 . The rental rate of capital (r) is $40 and the wage rate (w) is $12.
a. For a given level of output, what should be the ratio of capital to labor in order to minimize costs?
b. How much capital and labor should be used to produce 400 units of output? What is the total cost?
c. What is the short run total cost if output is decreased to 300 units?
d. How would the capital labor choice and total cost change in the long run?
e. Would the firm prefer to relocate if input prices are r = 60 and w = 8 at an alternative
location assuming relocation is costless?

12. A firm's production is represented by the following function: Q = L¹/4 K³/4. The rental
rate of capital (r) is $40 and the wage rate (w) is $12.
a.
For a given level of output, what should be the ratio of capital to labor in order to
minimize costs?
b.
How much capital and labor should be used to produce 400 units of output? What
is the total cost?
C.
What is the short run total cost if output is decreased to 300 units?
d. How would the capital labor choice and total cost change in the long run?
e. Would the firm prefer to relocate if input prices are r = 60 and w=8 at an alternative
location assuming relocation is costless?

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