Explore BrainMass
Share

Explore BrainMass

    Cobb-Douglas Production function: Optimal Labor capital mix

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Suppose a firm assumes the following production function:
    Log Q=2 + .8 log K + .1 log L
    a) Currently, the firm hires 10,000 workers and employs 50 units of capital. The "wage" of capital and labor are $500 and $800 respectively, what would you suggest would be the firm's mix of labor and capital if it produces 2,000,000 units?
    b) Is this an example of a Cobb-Douglas Production function?
    c) Would you suggest this firm merge with similar firms? Explain.

    © BrainMass Inc. brainmass.com October 9, 2019, 9:33 pm ad1c9bdddf
    https://brainmass.com/economics/production/cobb-douglas-production-function-optimal-labor-capital-mix-189582

    Attachments

    Solution Preview

    See the attached file for complete solution.

    Suppose a firm assumes the following production function:
    Log Q=2 + .8 log K + .1 log L
    a) Currently, the firm hires 10,000 workers and employs 50 units of capital. The "wage" of capital and labor are $500 and $800 respectively, what would you suggest would be the firm's mix of labor and capital if it produces 2,000,000 units?
    Log Q=2 + .8 log K ...

    Solution Summary

    This problem explains the concepts related to production functions in microeconomics. Shows the calculations in step-by-step manner for easy understanding. Solution presented in formatted word document.

    $2.19