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A paper company needs to produce 2,000 reams of paper for its customers. The firm's long-run production function and the marginal productivities of the inputs are:
Q = 4K0.75L0.25 MPL = K0.75/L0.75 MPK = 3L0.25/K0.25
where Q is the number of reams produced, K is the quantity of capital rented and L is the quantity of labour hired. The weekly cost function is C = 20K + 2L, where C is the total cost of production.
What ratio of capital to labour minimizes total costs?
How much labour and capital will need to be employed to produce 2,000 reams a week?
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