Suppose a firm has a production function given by Q = K^{0.5}L^{0.5}. The firm pays a wage of $64...


Suppose a firm has a production function given by Q = {eq}K^{0.5}L^{0.5} {/eq}. The firm pays a wage of $64 per unit and pays a rental rate of the capital of $5 per unit. K = 256 in the short run. The maximum level of profit this firm could make in the short run if it charges a constant price of $100 is:

a. $8720

b. $10000

c. $9600

d. $6400

Production function:

Production function shows the relationship between input and output. It means labor and capital are used to produce goods and services by converting raw material into the finished goods.

Answer and Explanation: 1

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None of the option is correct

This option is correct because

Here, K= Capital

L= ,Labor

MRTS= Marginal rate of technical substitution


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Learn more about this topic:

Production Function in Economics: Definition, Formula & Example


Chapter 11 / Lesson 27

Learn about the production function. Read the production function definition in economics, learn the production function formula. Plus, see graphs and examples.

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