A firm has the following production function: Q = 7*K1/2*L1/2a) Calculate the amount of output...
Question:
A firm has the following production function: {eq}Q=7*K^{\frac{1}{2}}*L^{\frac{1}{2}} {/eq}
a) Calculate the amount of output the firm should expect if it uses 25 units of capital and 50 units of labor.
b) Suppose the firm wants to produce the same amount of output from a), but only has 15 units of capital. How much labor will it need to hire?
c) Suppose that a unit of capital costs $50, and a unit of labor costs $20. What is the cost of producing that quantity in part a) and in part b)?
Production Function:
The production function of a firm represents the relationship between the factors of production employed and the resultant output produced in production activity. It is a mathematical function that allows the calculation of the units of a good or service which can be produced using a certain combination of factor inputs, primarily labor and capital.
Answer and Explanation: 1
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Production Function in Economics: Definition, Formula & Example
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