Suppose that a firm has production function f(K, L) = K2a + Lª where a > 1. Assume that PK = PLwhere pk is the price of capital per unit and på is the price of labour per unit. If the firm isproducing at an optimal point then which of the following can we conclude?The firm will use equal quantities of capital and labour.The firm will use twice as much capital as labour.O The marginal rate of technical substitution will equal the price ratio.O The firm will only use capital in production.O More than one of the above.

We must examine the conditions necessary for profit maximization in a firm's production in order to…

Suppose that a firm has production function ƒ(K, L) = K2a + Lª where a > 1. Assume that pk = PL where pk is the price of capital per unit and pL is the price of labour per unit. If the firm is producing at an optimal point then which of the following can we conclude? O The firm will use equal quantities of capital and labour. The firm will use twice as much capital as labour. The marginal rate of technical substitution will equal the price ratio. The firm will only use capital in production. More than one of the above.

Suppose that a firm has production function ƒ(K, L) = K2a + Lª where a > 1. Assume that pk = PL where pk is the price of capital per unit and pL is the price of labour per unit. If the firm is producing at an optimal point then which of the following can we conclude? O The firm will use equal quantities of capital and labour. The firm will use twice as much capital as labour. The marginal rate of technical substitution will equal the price ratio. The firm will only use capital in production. More than one of the above.

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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