Business, 25.02.2020 02:15 galarzachristopher

Suppose a firm has the following production function: Q(L, K)=4K1/2L1/2 Recall that the isocost line is as follows: C=wL+rK What is the (long run) optimal choice of L and K for a given Q, w, and r? In other words, provide a formula for the optimal choice of labor L∗(w, r,Q) and capital K∗(w, r,Q) as a function of the parameters Q, w, and r. Given Q=16, w=4, and r=1, what are the optimal levels of labor and capital, L∗ and K∗? What is the cost of producing Q=16 at these input prices? Suppose now that you are in the short run, Q=16, w=4, r=1, and the capital level is fixed at K¯=16. What is the optimal level of labor in the short run? What is the cost of producing Q=16 in the short run at these input prices?

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Suppose a firm has the following production function: Q(L, K)=4K1/2L1/2 Recall that the isocost line...

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