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Write the firm''s isocost equation

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Reference no: EM13876868

Assume a firm has the production function Q = 2.5K 0.4 L0.5.

(a) Write the firm's Isoquant equation associated with the production of 20 units of output.

(b) Calculate MRTS for labor input L = 6 and L = 8.

(c) Assume labor costs $80 per unit and capital rental costs $200 a unit. What
is the cost of producing 20 units of output when the firm employs 6 units of labor? What about 8 units of labor? Which one costs more? Could this be anticipated by the MRTSs you calculated in part(b)?

(d) What is the firm's least-cost combination of labor and capital for producing 20 units of output?

(e) What is the firm's total cost at the least-cost combination of labor and capital?

(f) What is the firm's profit if the price of this good in the market is $200 per unit?

(g) Write the firm's Isocost equation.

Reference no: EM13876868

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