Which process is now economically efficient

Reference no: EM133426134

Question

A firm plans to produce 500 units per day of good Z. The firm's production engineer finds two technically efficient processes (i.e., input combinations of labour and capital) to produce 500 units per day:

If the production function for the existing technology is Q = f ( L, K ), where Q is the maximum possible output, L is the amount of labour used, and K is the amount of capital used, then f (625, 45) = __________ and f (250, 125) = __________.

If the firm must pay $350 per day for a unit of labour and $1,500 per day for a unit of capital, which process is economically efficient, Alpha or Beta?

If the price of labour falls to $300 per day for a unit of labour and the price of capital remains $1,500, which process is now economically efficient, Alpha or Beta?

Reference no: EM133426134

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