QUESTION • A producer of a particular product has the following production function: Q = 100K05 L0.5 During the last production period, the firm operated efficiently and used input rates of 100 and 25 for capital and labour, respectively. • (a). What is the marginal product of capital and the marginal product of labour based on the input rates specified? • (b). If the rental price of capital was N20 per unit, what was the wage rate? (C). Suppose that the rental price of capital is expected to increase to N25 while the wage rate and the labour input will remain unchanged under the terms of a labour contract. If the firm maintains efficient production, what input rate of capital will be used?
QUESTION • A producer of a particular product has the following production function: Q = 100K05 L0.5 During the last production period, the firm operated efficiently and used input rates of 100 and 25 for capital and labour, respectively. • (a). What is the marginal product of capital and the marginal product of labour based on the input rates specified? • (b). If the rental price of capital was N20 per unit, what was the wage rate? (C). Suppose that the rental price of capital is expected to increase to N25 while the wage rate and the labour input will remain unchanged under the terms of a labour contract. If the firm maintains efficient production, what input rate of capital will be used?
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Transcribed Image Text:Optimal Input Combinations..
QUESTION
• A producer of a particular product has the following production
function:
Q = 100K05 L05
During the last production period, the firm operated efficiently
and used input rates of 100 and 25 for capital and labour,
respectively.
(a). What is the marginal product of capital and the marginal
product of labour based on the input rates specified?
(b). If the rental price of capital was N20 per unit, what was the
wage rate?
(C). Suppose that the rental price of capital is expected to increase
to N25 while the wage rate and the labour input will remain
unchanged under the terms of a labour contract. If the firm
maintains efficient production, what input rate of capital will be
used?
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