Question

Suppose a firm’s production function is given by Q = L^1/2*K^1/2.

The Marginal Product of Labor and the Marginal Product of Capital are given by: MP_L = K^1/2/2L^1/2 , and MP_K = L^1/2/2K^1/2.

a) If the price of labor is w = 36, and the price of capital is r = 64, how much labor and capital should the firm hire in order to minimize the cost of production if the firm wants to produce output Q = 36?

b) What is the firm’s Total Cost function TC(Q)?

c) What is the firm’s marginal cost of production?

Answer 1