Quiz 8 - L* = 5; K* = 20 b) Sketch the graph of the...

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Econ 302 Quiz 8 McLeod Name _________________________ ID # _____________________________ 1. (16 points)Suppose a firm’s production function is given by Q = β α K AL . Thus the marginal product of labor is given by: K AL MP L 1 - = and the marginal product of capital is given by: 1 - = K AL MP K Suppose A = 1; 2 1 = ; 2 1 = Also, the price of labor, w = 4 and the price of capital, r = 1. a) How much labor and capital should the firm hire if it wants to produce 10 units of output while minimizing its cost of production?
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Unformatted text preview: L* = 5; K* = 20 b) Sketch the graph of the isoquant for Q = 10. The isoquant should contain points where K*L = 100. Some examples are given in the table below. Capital Labor 1 100 4 25 10 10 20 5 50 2 100 1 2. (4 points) Suppose a firms production function is Q = L 1/2 K 1/4 . Does this production function exhibit increasing, constant, or decreasing returns to scale? Decreasing Returns to Scale...
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