Suppose capital and labor are perfect complements for a particular production process. If the price of labordecreases, holding the price of capital and the level of output constant, the firm should:use more capital and less labor.eliminate all use of labor.use more labor and less capital.use the same amounts of capital and labor. For the production function Q = aL + bK, where a and b are constants, the MRTSL,K:remains constant as the firm substitutes labor for capital.is undefined.declines as the firm substitutes labor for capital.implies upward-sloping, straight-line isoquants.

1.When capital and labor are perfect complements, it implies that they are utilized in a fixed…

Answered: Suppose capital and labor are perfect…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q.2 - a) Explain the five fundamental questions that economics attempts to answer. b) What is the difference between a production function and an isoquant? c) Distinguish between individual firm's supply curve and market supply curve. d) What is a production function? How does a long-run production function differ from a short- run production function?
Grease Tech produces oil changes. The production of oil changes reles on both capital (K) and labor (L) and is combined in the following production function F (K, L) = KILL Take the derivative of this production function with respect to capital. What is the marginal product of capital evaluated at (le. just plug in the numbers) 64 units of capital used and 16 units of labor?
Economics Suppose that firms face the following production function: Q = L + K + 2L ^ (1/2) * K ^ (1/2) This production function exhibits information that is not enough to determine Returns to Scale Increasing Returns to Scale Decreasing Returns to Scale Constant Returns to Scale
The production period during which the firm can alter its use of all inputs is known as the long run short run
Solve the attahment.
Assuming the firm is minimizing its cost and the price of labour is $10 per unit and the price of capital is $20 per unit. the marginal product of labour is 50, what must the marginal product of capital be?
Consider the production function: Y = z.f(K,N,L) where Y is output, z is a parameter capturing technology, K is capital, N is labour and L is the area of land.
which of the following statements is true? 1. if the marginal product of labour is higher than the marginal product of capital, then the firm uses more labour than capital in the short run. 2.if the wage rate for labour is lower than the cost of capital, then the firm uses more labour than capital in the short run. 3. if for a given amount of initial capital, the production functions means more labour is needed than capital, then the firm uses more labour than capital in the short run. 4. if for a given amount of initial labour, the production function means that more labour is needed than capital, then the firm uses more labour than capital in the short run.
A small specialty cookie company, whose only variable input is labor, finds that the average worker can produce 100 cookies per day, the cost of the average worker is $32 per day, and the price of a cookie is $1.00. Is the firm maximizing profit? The firm A. is not maximizing profit because the marginal revenue product of labor is greater than the wage. B. is not maximizing profit because the marginal revenue product of labor is less than the wage. C. is maximizing profit because the marginal product of labor is greater than the wage. D. is not maximizing profit because the price of the output is not equal to the wage. E. is not maximizing profit because the marginal product of labor is greater than the wage.
Suppose that the production technology is Y = min{K, L). We want to produce 10 units of output. The level of wages is W = 2 and the price of capital is R = 3 What is the cost minimizing choice of K and L? What is the level of the cost? (Hint: Plot the isoquant at Y = 10 )

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