Suppose that a firm’s production function is q =10L0.5K0.5 (i.e. q = 10√L√K). The cost of a unit of labour is €20 and the cost of a unit of capital is €80. The firm wants to produce 80 units of output. The marginal rate of technical substitution is K/L The optimal level of labour required to produce 80 units of output is A. 16 B. 8 C. 4 D. 2

Suppose that a firm’s production function is q =10L0.5K0.5 (i.e. q = 10√L√K). The cost of a unit of labour is €20 and the cost of a unit of capital is €80. The firm wants to produce 80 units of output. The marginal rate of technical substitution is K/L The optimal level of labour required to produce 80 units of output is A. 16 B. 8 C. 4 D. 2

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter7: Production And Cost In The Firm

Section7.A: Appendix: A Closer Look At Production And Cost

Problem 1AQ

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Suppose that a firm’s production function is q =10L0.5K0.5 (i.e. q = 10√L√K). The cost of a unit of labour is €20 and the cost of a unit of capital is €80. The firm wants to produce 80 units of output. The marginal rate of technical substitution is K/L The optimal level of capital required to produce 80 units of output is A. 16 B. 8 C. 4 D. 2
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