Question

In: Economics

Suppose a firm has the production function, Q = 12KL. It has a contract to produce...

Suppose a firm has the production function, Q = 12KL. It has a contract to produce 144 units of output per day. One way to do is to use 3 units of capital (K) and 4 units of labor (L). Suppose a unit of labor costs $2 (wage = w) while a unit of capital costs $3 (r).

What will be the marginal product of capital (MPK) when K = 3 units and L = 4 units?

A) MPK = 48

B) MPK = 56

C) MPK = 64

D) MPK = 36

Solutions

Expert Solution

Correct option - (A) MPK = 48

given, Q = 12KL

MPK = d(Q)/d(K) = d(12KL)/d(K)

MPK = (12L) d(K)/d(K) = 12L

Now at K = 3 and L = 4.

MPK = 12(4) = 48

Therefore, MPK = 48

Rahul Sunny answered 2 years ago
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