Suppose a firm has a production function given by Q = K^{0.5}L^{0.5}. The firm pays a wage of $64...
Question:
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
MPL=...
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Production Function in Economics: Definition, Formula & Example
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Chapter 11 / Lesson 27
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