Suppose we have a production function f(L, K) = L}K} 4а. Find the marginal product of labor. Explain in words what this means. 4b. Suppose the hourly wage is $10 and the price of each unit of capital is $25. The price of output is constant at $50 per unit. If the current capital stock is fixed at 1600 units, how much labor should the firm employ in the short run? How much profit will the firm earn? 4с. Now suppose the firm has a per-worker tax of $1 levied on them. How does this change their labor choice in the short run and their profit? 4d. Now let's ignore the per-worker tax and say instead the firm has a payroll tax where t = .10. What is the labor choice in the short run and the firm's profit?
Suppose we have a production function f(L, K) = L}K} 4а. Find the marginal product of labor. Explain in words what this means. 4b. Suppose the hourly wage is $10 and the price of each unit of capital is $25. The price of output is constant at $50 per unit. If the current capital stock is fixed at 1600 units, how much labor should the firm employ in the short run? How much profit will the firm earn? 4с. Now suppose the firm has a per-worker tax of $1 levied on them. How does this change their labor choice in the short run and their profit? 4d. Now let's ignore the per-worker tax and say instead the firm has a payroll tax where t = .10. What is the labor choice in the short run and the firm's profit?
Chapter10: Cost Functions
Section: Chapter Questions
Problem 10.3P
Related questions
Question
![Suppose we have a production function
f(L, K) = LK*
4а.
Find the marginal product of labor. Explain in words what this means.
4b.
Suppose the hourly wage is $10 and the price of each unit of capital is $25. The price of output is constant
at $50 per unit. If the current capital stock is fixed at 1600 units, how much labor should the firm employ
in the short run? How much profit will the firm earn?
4с.
Now suppose the firm has a per-worker tax of $1 levied on them. How does this change their labor choice in
the short run and their profit?
4d.
Now let's ignore the per-worker tax and say instead the firm has a payroll tax where t = .10. What is the
labor choice in the short run and the firm's profit?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fefdff9af-baab-4c8b-9f36-592ca8afa521%2F4aece441-4810-4dbf-bca9-6b867e4ef2ec%2Fs5rng5_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose we have a production function
f(L, K) = LK*
4а.
Find the marginal product of labor. Explain in words what this means.
4b.
Suppose the hourly wage is $10 and the price of each unit of capital is $25. The price of output is constant
at $50 per unit. If the current capital stock is fixed at 1600 units, how much labor should the firm employ
in the short run? How much profit will the firm earn?
4с.
Now suppose the firm has a per-worker tax of $1 levied on them. How does this change their labor choice in
the short run and their profit?
4d.
Now let's ignore the per-worker tax and say instead the firm has a payroll tax where t = .10. What is the
labor choice in the short run and the firm's profit?
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