Suppose the production function is q = 12 L0.25 K0.75. Determine the long-run capital-to-labor ratio (K/L) if the cost a unit of capital (r) is three times the cost of a unit of labor (w)
What will be an ideal response?
The firm minimizes costs by setting MRTS = w/r. MRTS = MPL/MPK = K/3L = 1/3 = w/r. This firm will set K/L equal to one.
You might also like to view...
Peg's Manicure Manor did 4,000 sets of nails in 2015 and 4,500 sets of nails in 2016. The price of a set of nails was $20 in 2015 and $22 in 2016. If 2015 is the base year, Peg's contribution to real GDP in 2015 was ________ and in 2016 was ________.
A. $80,000; $88,000 B. $80,000; $90,000 C. $88,000; $90,000 D. $80,000; $99,000
The CPI market basket is determined by
A) tax return data of households. B) supermarket purchases recorded by scanner technology. C) profit releases of the largest companies. D) a consumer survey. E) surveys asking large retail companies, such as Wal-Mart, about their sales of consumer goods and services.
The long-run aggregate supply curve of an economy corresponds to
A) a point inside the production possibilities curve. B) a point outside the production possibilities curve. C) a point on the production possibilities curve. D) none of the above: there is no relationship between the long-run aggregate supply curve and the production possibilities curve.
Which of the following actions can prevent migration of individuals from one health insurance policy to another?
a. Lowering the opportunity costs of switching from one policy to another. b. Fixing a uniform premium rate for all individuals under one type of policy. c. Conducting an interview of the people before placing them under different policies. d. Setting up a norm requiring all individuals to purchase the same coverage.