In: Economics

# A firm produces output using capital (K) and labor (L). Capital and labor are perfect complements...

1. A firm produces output using capital (K) and labor (L). Capital and labor are perfect complements and 1 unit of capital is used with 2 units of labor to produce 1 unit of output. Draw an example of an isoquant. If wages and rent are $2 and$3, respectively, what is the Average Total Cost?

2. A firm has a production function given by Q=4KL where K, L and Q denote capital, labor, and output, respectively. The firm wants to produce an output of 16 units at a minimum cost. Show the solution graphically assuming that wages and rent are $1 and$2, respectively.

##### The auto maker Carbon Motors produces cars using capital (K) and labor (L) according to the...
The auto maker Carbon Motors produces cars using capital (K) and labor (L) according to the production function f(K, L) =K^3/4L^1/4. A different car company, Emissions Inc, produces cars according to the production function f(K, L) =K^1/2L^1/2. The wage rate paid to workers is w and the price of capital is r. (a) Find the cost minimizing input choices of Carbon and Emissions subject to producing q cars. (These will be functions of w ,r, and q.) For the same...
##### A firm produces output using the technology: Q = (0.001)KL0.5 where capital, K, is measured in...
A firm produces output using the technology: Q = (0.001)KL0.5 where capital, K, is measured in machine-hours, labor, L, is measured in person-hours, and Q denotes the yearly output. The hourly wage rate in the United States WL = $10, and the hourly rental rate of capital is WK = 20 and the Price is$1. (a) Does this production function display increasing returns to scale, constant returns to scale or decreasing returns to scale (hint—use labor). Please show how...
##### Suppose output, Q, is produced by labor, L, and capital, K, according to the following function:...
Suppose output, Q, is produced by labor, L, and capital, K, according to the following function: Q = K ½ L½.. Suppose the firm sells each unit of output in a competitive market for a price P = $100. Suppose the firm hires each unit of labor in a competitive market for a wage W =$25. Suppose the firm has to make do for now with a stock of capital K = 49; moreover, suppose each unit of capital...
##### Using iso-cost, iso-quant analysis draw the following concepts a. perfect complements of labor and capital b....
Using iso-cost, iso-quant analysis draw the following concepts a. perfect complements of labor and capital b. a long run expansion path of a capital-intensive firm c. substitution effect of a wage increase d. constant returns to scale e. economic efficient point, technological efficient points, technological inefficient points