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In: Economics

Based on estimates provided by an efficiency expert, the firm's production function for Good X is...

Based on estimates provided by an efficiency expert, the firm's production function for Good X is given by Q = 2K + L, where Q is the quantity of output, K is the quantity of capital, and L is the quantity of labor.

  1. If this firm uses two units of capital and 2 units of labor, what is the quantity of output?
  2. Graph the isoquant corresponding to 6 units of output. Label the axes properly.
  3. What is the marginal product of capital and labor, respectively? Does the answer depend on how much labor and capital are used?
  4. If the price of labor (w) is $2 per hour and the rental price of capital (r) is $3 per hour, how much capital and labor should each be used to minimize the cost of producing 6 units of output?

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Expert Solution

Rahul Sunny answered 2 years ago
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