2.The production function of a firm is estimated to be Q=f(K, L) = KL+ L.Market conditions require that the firm produce 200 units of output. Wage rate(w) is equal to 2 TL, while the price of capital (r) is equal to 1 TL.How much labour (L) and capital (K) should be used by the firm?Assume that the market conditions lead the firm to produce 242 units.What would the firm's optimal choice of K and L be in the short run?How about long run?What is the loss caused by the firm's inability to change the combinationof K and L immediately? (What is the extra cost to be incurred in theshort run)a)b)c)d)

Production function: Q=f(K,L)=KL+LK denotes capital and L denotes labor. Q is the total output.Wage…

The production function of a firm is estimated to be Q=f(K,L)= KL + L. Market conditions require that the firm produce 200 units of output. Wage rate (w) is equal to 2 TL, while the price of capital (r) is equal to 1 TL. a) How much labour (L) and capital (K) should be used by the firm? b) Assume that the market conditions lead the firm to produce 242 units. What would the firm's optimal choice of K and L be in the short run? How about long run? c)

The production function of a firm is estimated to be Q=f(K,L)= KL + L. Market conditions require that the firm produce 200 units of output. Wage rate (w) is equal to 2 TL, while the price of capital (r) is equal to 1 TL. a) How much labour (L) and capital (K) should be used by the firm? b) Assume that the market conditions lead the firm to produce 242 units. What would the firm's optimal choice of K and L be in the short run? How about long run? c)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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