Suppose a firm's technology is represented by the Cobb-Douglas production function F(L, K) = 5LK. The wage rate is $50 and the rental rate of capital is $10. What is the least-cost combination to produce 100 units of output?
What will be an ideal response?
The tangency condition requires that MRTSLK = K/L = W/R = ($50/$10) = 5. This means that there should be 5 times more capital than labor, so the production function can be written F(L, 5L) = 5L(5L) = 25L2. Therefore, to produce 100 units of output requires 100 = 25L2 which implies that L = 2 and K = 10.
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A) decrease the money supply B) increase interest rates C) increase government spending D) increase taxes
A Japanese television sells for ¥100,000 and a dollar is equal to ¥100. What is the dollar price of the television?
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Under this condition, we expect that an increase in consumer income shifts the demand curve for bananas: A) rightward B) no shift. C) leftward. D) upward.
Total surplus in a market will increase when the government
a. imposes a tax on that market. b. imposes a binding price floor on that market. c. removes a binding price ceiling from that market. d. None of the above is correct.