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Suppose there are two inputs in the production function, labor and capital, and these two inputs...

Suppose there are two inputs in the production function, labor and capital, and these two inputs are perfect substitutes. The existing technology permits 5 machines to do the work of 2 workers. So the production function is f(E, K) = 2K + 5E. The firm wants to produce q units of output, where q > 0 is some number. Suppose the price of capital is $10 per machine per hour. What combination of inputs will the firm use if the wage rate is $15 or $25 or $35 per hour?

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Rahul Sunny answered 2 years ago
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