This preview shows pages 1–2. Sign up to view the full content.
This preview has intentionally blurred sections. Sign up to view the full version.
View Full Document
Unformatted text preview: function has constant returns to scale. 3) a) Since 9 K , we get 45 9 18 L which implies that L = 36/18 = 2. Therefore the firms total cost with this input combination is 4(2) + 5(9) = $53. b) If the firm could operate optimally, it would choose labor and capital to satisfy the tangency condition: 5 4 1 2 2 L K , implying that . 4 8 10 L K Also, . 45 2 K KL Combining these two conditions, 18 K = 4.24 and L = 4.8. Now the firms expenditure would be 4(4.24) + 5(4.8) = $41 approximately. Therefore the firm loses about $12 because of its constraint on capital....
View
Full
Document
This note was uploaded on 05/11/2011 for the course ECON 301 taught by Professor Sheng during the Spring '11 term at ITT Tech Pittsburgh.
 Spring '11
 Sheng

Click to edit the document details