Question
Answered step-by-stepAsked by zhe995353 on coursehero.com
A factory hires workers at a wage of w=4 and capital at a rental...
A factory hires workers at a wage of w=4 and capital at a rental rate of r=3. The factory currently has
four units of capital (K=4). Output (Q) is determined by the production function:
Q = 0.25L^2K^3
(d) In the long run, if the firm wishes to continue producing Q=65,536, how much labor and capital
will it employ? What is the cost of 65,536 in the long run?
explain the solution. why there are 2K/3L =4/3 ?
Image transcription text
(d) In the LR, the firm will choose L and K where:
W
MRTS
=
r
2K
Previous Page
3L
3
:. K = 2L
Using the production function to solve:
0.2512 (2L) 3 = 65536
0.251223 13 = 65536
215 = 65536
15 = 32768
L = 8
Therefore L=8 and K=16. The cost is:
CLR (65536) = 4(8) + 3(16) = 80
Answer & Explanation
Solved by verified expertAnswered by shrutichill on coursehero.com
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