You manage a firm that has the production function q = 18L1/3K1/2. You can hire labor (L) at a wage of $15 per unit of labor and rent capital (K) at a rate of $6 per unit of capital. Your boss gives you a budget of $1800. Write your budget constraint in terms of inputs (L and K): What is your optimal amount of L and K? L = K = Does the firm have increasing, decreasing or constant returns to scale? How much output (q) can you make when operating at peak efficiency given these constraints? Round your answer to 2 decimal places as necessary q=
You manage a firm that has the production function q = 18L1/3K1/2. You can hire labor (L) at a wage of $15 per unit of labor and rent capital (K) at a rate of $6 per unit of capital. Your boss gives you a budget of $1800. Write your budget constraint in terms of inputs (L and K): What is your optimal amount of L and K? L = K = Does the firm have increasing, decreasing or constant returns to scale? How much output (q) can you make when operating at peak efficiency given these constraints? Round your answer to 2 decimal places as necessary q=
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.3P
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Transcribed Image Text:You manage a firm that has the production function q = 18L1/3K1/2. You can hire labor (L) at a wage of $15 per unit of
labor and rent capital (K) at a rate of $6 per unit of capital. Your boss gives you a budget of $1800.
Write your budget constraint in terms of inputs (L and K):
What is your optimal amount of L and K?
L =
K =
Does the firm have increasing, decreasing or constant returns to scale?
How much output (q) can you make when operating at peak efficiency given these constraints? Round your answer to 2
decimal places as necessary
q=
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