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Determine the firmoptimal capital-labor ratio

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Reference no: EM131449303

Davy Metal Company has the following production function: 

Q = 500L0.6K0.8, 

MPL = 300L-0.4K0.8

MPK = 400L0.6K-0.2

Employees earn $15 per hour. Rental charge is$50 per hour on capital. Davy forecasts annual costs of $500,000 per year. 

a. Determine the firm'soptimal capital-labor ratio, given the information above.

b. How much capital and labor should the firm employ, given the $500,000 budget?

Calculate the firm'soutput. Please show all steps.

Reference no: EM131449303

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