Suppose also that we are now in the Long-Run, and that the firm has decided to still produce the same Q* as in Problem 1. That is, the firm decides to set Q = 160. 7. If the firm wants to cost minimize, what must be the ratio of K to L that they employ given the prices in this market? 8. Suppose that the firm wants to produce Q* = 160. What is its cost-minimizing choice of K & L?
Suppose also that we are now in the Long-Run, and that the firm has decided to still produce the same Q* as in Problem 1. That is, the firm decides to set Q = 160. 7. If the firm wants to cost minimize, what must be the ratio of K to L that they employ given the prices in this market? 8. Suppose that the firm wants to produce Q* = 160. What is its cost-minimizing choice of K & L?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
I am confused on these questions
![Suppose also that we are now in the Long-Run, and that the firm has decided to still produce
the same Q* as in Problem 1. That is, the firm decides to set Q = 160.
7. If the firm wants to cost minimize, what must be the ratio of K to L that they employ
given the prices in this market?
8. Suppose that the firm wants to produce Q* = 160. What is its cost-minimizing choice of
K & L?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7fa42c6c-1d00-4b82-a0d1-311b978341d3%2F2a294437-1e6a-4693-9481-7b3208df7fd4%2Ffi485_processed.png&w=3840&q=75)
Transcribed Image Text:Suppose also that we are now in the Long-Run, and that the firm has decided to still produce
the same Q* as in Problem 1. That is, the firm decides to set Q = 160.
7. If the firm wants to cost minimize, what must be the ratio of K to L that they employ
given the prices in this market?
8. Suppose that the firm wants to produce Q* = 160. What is its cost-minimizing choice of
K & L?
![Problem 1: Short-Run Profit Maximization
Consider a firm that uses both capital (K) and labour (L) to produce a final product (Q) that it
sells at the market price $5. The firm buys Labour at a cost of $4 per unit and capital at a cost of
$10 per unit. The firm is a price-taker for all prices with the following production function:
Q = 4K¹//2L²¹/2
This production function implies the following:
[¹/₂
K¹/₂
MPK = 2-
K¹/₂
L¹/₂
Suppose also that the firm currently has 16 units of capital (K = 16) in the Short-Run.
MPL = 2-](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7fa42c6c-1d00-4b82-a0d1-311b978341d3%2F2a294437-1e6a-4693-9481-7b3208df7fd4%2Fzvvlaxy_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 1: Short-Run Profit Maximization
Consider a firm that uses both capital (K) and labour (L) to produce a final product (Q) that it
sells at the market price $5. The firm buys Labour at a cost of $4 per unit and capital at a cost of
$10 per unit. The firm is a price-taker for all prices with the following production function:
Q = 4K¹//2L²¹/2
This production function implies the following:
[¹/₂
K¹/₂
MPK = 2-
K¹/₂
L¹/₂
Suppose also that the firm currently has 16 units of capital (K = 16) in the Short-Run.
MPL = 2-
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![ENGR.ECONOMIC ANALYSIS](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9780190931919/9780190931919_smallCoverImage.gif)
![Principles of Economics (12th Edition)](https://www.bartleby.com/isbn_cover_images/9780134078779/9780134078779_smallCoverImage.gif)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
![Engineering Economy (17th Edition)](https://www.bartleby.com/isbn_cover_images/9780134870069/9780134870069_smallCoverImage.gif)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
![Principles of Economics (MindTap Course List)](https://www.bartleby.com/isbn_cover_images/9781305585126/9781305585126_smallCoverImage.gif)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
![Managerial Economics: A Problem Solving Approach](https://www.bartleby.com/isbn_cover_images/9781337106665/9781337106665_smallCoverImage.gif)
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
![Managerial Economics & Business Strategy (Mcgraw-…](https://www.bartleby.com/isbn_cover_images/9781259290619/9781259290619_smallCoverImage.gif)
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education