A firm operates with a Cobb-Douglas Production function: Q = 12K0.4L0.4 where K is units of capital, and L is number of laborers. To produce an output, the firm must pay $40 per unit of capital, and $5 per laborer. However, the firm has a budget of $800 only to spend for labor cost and capital cost.
A firm operates with a Cobb-Douglas Production function: Q = 12K0.4L0.4 where K is units of capital, and L is number of laborers. To produce an output, the firm must pay $40 per unit of capital, and $5 per laborer. However, the firm has a budget of $800 only to spend for labor cost and capital cost.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter7: Production And Cost In The Firm
Section: Chapter Questions
Problem 19PAE
Related questions
Question
Answer the Constrained Optimization: Cobb-Douglas Production Function:
1. Based from the factor shares of the two inputs, what will happen to the number of output if it the firm decides to triple both the amount of labor and capital?
Transcribed Image Text:A firm operates with a Cobb-Douglas Production function:
Q = 12K0.4L0.4
where K is units of capital, and L is number of laborers. To produce an output, the firm must pay
$40 per unit of capital, and $5 per laborer. However, the firm has a budget of $800 only to spend
for labor cost and capital cost.
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