What is the firms optimal capital-labor ratio

Assignment Help Business Economics
Reference no: EM13885975

Suppose a firm’s production function is: f(E,K) = 40K0.25E0.75 The corresponding marginal product functions are: MPK = 10K-0.75E0.75 and MPE = 30K0.25E-0.25 Suppose initially that the hourly wage is $9 and the price of each unit of capital is $15.

a. If the firm is maximizing profits, what is the firm’s optimal capital-labor ratio?

b. If the firm has hired 25 machines and 50 workers, is it maximizing profits? Why or why not?

c. If the price of labor increases to $15 and the firm increases its capital stock to 12 units from 10 units, how many workers will the firm choose to hire? Does the scale or substitution effect dominate in this case?

Reference no: EM13885975

Questions Cloud

Consider two firms-assuming entire market will be served : Consider two firms, located at each end of a street of length 1. There are customers uniformly distributed along this street. Customers incur transportation costs TC = 2x2, where x is the distance they need to travel in order to purchase the product...
What are the negative affects of habitat fragmentation : What are the negative affects of habitat fragmentation?
What is the market-clearing wage with open borders : Assume that labor demand for low-skilled workers in the United States is: w = 24 – 0.1E where E is the number of workers (in millions) and w is the hourly wage. Assume there are currently 120 million domestic U.S. low-skilled workers who supply labor..
What is the equilibrium wage and the employment level : In a particular industry, labor supply is Es = 10 + w and labor demand is Ed = 40 – 4w, where E is the level of employment and w is the hourly wage. What is the equilibrium wage and the employment level if the labor market is competitive? What is the..
What is the firms optimal capital-labor ratio : Suppose a firm’s production function is: f(E,K) = 40K0.25E0.75 The corresponding marginal product functions are: MPK = 10K-0.75E0.75 and MPE = 30K0.25E-0.25 Suppose initially that the hourly wage is $9 and the price of each unit of capital is $15. If..
Local healthcare committee in metropolitan area : You are assigned to work on a local healthcare committee in a metropolitan area. There is a plan to bring a new healthcare delivery system to the area. You are tasked with deciding which of the four different organized healthcare delivery system mode..
Controls or substantive tests of transactions in the payroll : 1.Identify three tests of controls or substantive tests of transactions in the payroll and personnel cycle that an auditor may perform using audit software.
Consumer elastities of the consumer products : Compare the income elasticities of the following consumer elastities of the following consumer products
Prove each of the following identities : Prove each of the following identities.

Reviews

Write a Review

Business Economics Questions & Answers

  Regulators should enforce antitrust laws against microsoft

Write a one page response to the following statement: "U.S. regulators should enforce antitrust laws against the Microsoft Corporation."

  Accounts receivable payments

A company's cash sales for the month are $200,000 and its accounts receivable payments for the month are $100,000. What is its total incoming cash flow.

  Elucidate how a temporary decrease in the us money supply

Elucidate how a temporary decrease in the U.S. money supply affects the money and FOREX markets. Label your short-run equilibrium point B and your long-run equilibrium point.

  Cost of printing music using an engraved plate technology

In 1796, Gottfried Christoph Härtel, a German music publisher, calculated the cost of printing music using an engraved plate technology and used these estimated cost functions to make production decisions. Graph the total cost, average total cost, av..

  Qpham can work as many or as few hours as she wants at the

q.pham can work as many or as few hours as she wants at the college bookstore for 9 per hour. but due to her hectic

  How the ppp methodology works

This exercise presents a simple example to elucidate how exchange-rate conversions can produce misleading results and how the PPP methodology works.

  Price and quantity intercepts and equilibrium

Graph the supply and demand curves. Please identify the x and y axis properly, the Price and quantity intercepts and equilibriumraph the supply and demand curves. Please identify the x and y axis properly, the Price and quantity intercepts and equili..

  What will the inflation rate be in the period of the cuts

You need both equations and clearly labeled graphs (separate graphs for each question) to answer the following questions. Assume that b=1/2 and that initially the real interest rate is equal to the marginal product of capital at 3%. How much can we e..

  Firms can have-accounting profits and economic losses

Firms can have: Accounting profits and economic losses, Accounting profits and economic profits, Accounting losses and economic losses, Accounting losses and economic profits.

  Illustrate which country has the most equal distribution

Using this information, draw a Lorenz curve for each country. Remember to convert the above table into a cumulative %. Illustrate which country has the most equal distribution of income.

  Illustrate what is the total price of program to consumers

The cost of running the government program ( assuming no storage costs). Illustrate what is the total price of the program to consumers.

  Quantity of labor at diminishing marginal returns

Does the law of diminishing marginal returns apply to this firm's production process. If so, explain why and find the quantity of labor at which diminishing marginal returns.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd