PS2 - FIN 501 Problem Set #2 Due Tuesday, September 14,...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
FIN 501 Problem Set #2 Due Tuesday, September 14, 2010 In these problems it is permissible (although not necessary) for the answers to be fractional numbers. For all problems show your work. Please include the names of your group members on your write-up. 1. Your firm faces a production function that is Q(K,L) = K 0.5 L 0.5 . Let w, the hourly wage rate of labor, be = $2. Let v, the hourly rental rate of capital, be = $8. a. Solve for the firm's demand for K and L as a function of Q. b. Based on your answer to (a), if you decide that you want to produce Q=40 units, how many units of K and L will you use to minimize costs? Explain how you found the answer. c. What is the total cost of producing Q = 40 units? d. When you are producing Q = 40 units, what is the marginal product of capital? What is the marginal product of labor? e. Starting at Q = 40, what is the marginal cost of producing another unit of Q? What is the marginal cost of producing a “little bit” more Q (e.g., the calculus answer)?
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 2

PS2 - FIN 501 Problem Set #2 Due Tuesday, September 14,...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online