The firm's production function is: q = K0,5 L0,5 and the total cost function is 10K...

The firm's production function is: q = K^0,5 L^0,5 and the total cost function is 10K + 10L = 10000 where q: output K: capital and L: labor

a. Calculate how many K and L are used for maximum production in 2 ways.

b. Draw the solution to the problem in graphic form with isoquant and isocost (TC) curves.

c. Draw it like No.2, add the following conditions in the same graph:

- if the price of L increases to 12

- if the price of L drops to 8

d. From the above problems, can you derive the labor demand function?

Solutions

Expert Solution

Rahul Sunny answered 11 months ago

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