Determining price of labor and capital

Reference no: EM1370195

Given production function Q= 100(L^0.5)(K^0.5), where L = labor hours per unit time, K=machine hours per unit time, and Q=output per unit time.

1. If the price of capital and labor are equal, will the K/L ratio along the expansion path be greater, less than, or equal to 1?

2. What will be the K/L ratio when the price of labor is 2, and the price of capital is 1, and why?

3. What explains the direction of the changed K/L ratio in (d) from that in (c)?

Reference no: EM1370195

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