Bonus Question 1 (6 pts) The manager of a national retailing outlet recently hired an economist to estimate the firm's production function. Based on the economist's report, the manager now knows that the firm's production function is given by Q=K0.5L0.5 and that capital is fixed at 4 units. a. Calculate the average product of labor when 9 units of labor are utilized. b. Calculate the marginal product of labor when 9 units of labor are utilized. c. Suppose the firm can hire labor at a wage of $10 per hour and output can be sold at a price of $100 per unit. Determine the profit-maximizing levels of labor and output. d. What is the maximum price of capital at which the firm will still make nonnegative profits?
Bonus Question 1 (6 pts) The manager of a national retailing outlet recently hired an economist to estimate the firm's production function. Based on the economist's report, the manager now knows that the firm's production function is given by Q=K0.5L0.5 and that capital is fixed at 4 units. a. Calculate the average product of labor when 9 units of labor are utilized. b. Calculate the marginal product of labor when 9 units of labor are utilized. c. Suppose the firm can hire labor at a wage of $10 per hour and output can be sold at a price of $100 per unit. Determine the profit-maximizing levels of labor and output. d. What is the maximum price of capital at which the firm will still make nonnegative profits?
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.1P
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Transcribed Image Text:Bonus Question 1 (6 pts)
The manager of a national retailing outlet recently hired an economist to estimate the firm's production
function. Based on the economist's report, the manager now knows that the firm's production function is
given by Q=K0.5L0.5 and that capital is fixed at 4 units.
a. Calculate the average product of labor when 9 units of labor are utilized.
b. Calculate the marginal product of labor when 9 units of labor are utilized.
c. Suppose the firm can hire labor at a wage of $10 per hour and output can be sold at a price of $100 per unit.
Determine the profit-maximizing levels of labor and output.
d. What is the maximum price of capital at which the firm will still make nonnegative profits?
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