maximum price of capital
Not what you're looking for?
The manager of a national retailing outlet recently hired an economist to estimate the firm's production function. Based on the economist's report, the manager now knows that the firm's production function is given by Q = K^1/2L^1/2 and that capital is fixed at 1unit.
a. Calculate the average product of labor when 9 units of labor are utilized.
b. Calculate the marginal product of labor when 9 units of labor are utilized.
c. Suppose the firm can hire labor at a wage of $10 per hour and output can be sold at a price of $100 per unit. Determine the profit-maximizing levels of labor and output.
d. What is the maximum price of capital at which the firm will still make non-negative profits?
Purchase this Solution
Solution Summary
What is the maximum price of capital at which the firm will still make non-negative profits?
Solution Preview
a. Calculate the average product of labor when 9 units of labor are utilized.
<br>
<br>average product of labor is APl = Q/L = (K^1/2 L^1/2)/L = L^ -1/2
<br>when L=9, Apl= 9^ -1/2 = 1/3
<br>
<br>b. Calculate the marginal product of labor when 9 units of labor are utilized. ...
Purchase this Solution
Free BrainMass Quizzes
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.