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    Short-Run Production and Marginal Revenue and Factor Costs

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    Consider the following short-run production function (where L = variable input, Q =output):

    Q = 10L - 0.5L2

    Suppose that output can be sold for $10 per unit. Also assume that the firm can obtain as much of the variable input (L) as it needs at $20 per unit.

    a. Determine the marginal revenue product function.
    b. Determine the marginal factor cost function.
    c. Determine the optimal value of L, given that the objective is to maximize profits.

    © BrainMass Inc. brainmass.com October 10, 2019, 12:31 am ad1c9bdddf
    https://brainmass.com/economics/factors-of-production/short-run-production-and-marginal-revenue-and-factor-costs-294997

    Solution Preview

    Consider the following short-run production function (where L = variable input, Q = output): Q = 10L - 0.5L2

    Suppose that output can be sold for $10 per unit. Also assume that the firm can obtain as much of the ...

    Solution Summary

    This solution determines the marginal revenue production function, the marginal factor cost function and the optimal value of L.

    $2.19