What is the return on operating capital that biddle

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Reference no: EM13148436

The product function for the BIDDLE Company is given by, Q=L^0.3K^0.3E^0.1M^0.18 Where Q=output, L=labor, K=operating capital, E=energy input, and M=materials. If the average product of capital is running 1.80, that is $1.80 per dollar, and the sell price of the product, Pq=$2.00, what is the return on operating capital that BIDDLE is currently deriving? Then if J.P. Morgan chase is loaning operating capital to the company at 7.5%, what is the cost of capital for the BIDDLE Company and is the company covering opportunity cost with the return they are deriving on operating capital? (Recall: in perfectly competitive markets, the value of the marginal product is equal the value (or cost) of the input)

Reference no: EM13148436

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