1. Suppose a firm is producing output according to Q=1001KL. A. Draw a sketch of this firm’s isoquant map B. What equation do you use to find a cost-minimizing combination of inputs for a certain output level Q.? K C. The marginal products of labor and capital are given by MP, = 50, and L MPK = 50, L respectively. The price of labor is $5 per unit, and the price of K capital is $20 per unit. What is the cost-minimizing input combination if the firm wants to produce 2000 units? 2. Suppose the level of capital stock in the short run is fixed to K, and you want to produce Q. units of output produced according to Q=100 KL. A. Write down a formula for the cost-minimizing choice of labor in this case B. Draw a graph of the cost-minimizing choice of labor in A) as a function of Q. 3. Assuming the conditions in Problem 1 and your solution in Problem 2, derive a short- run total cost function for a fixed level of capital stock K. Share this:TwitterFacebook
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