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# Cobb-Douglas Production function: Optimal Labor capital mix

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.

#### Solution Preview

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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.

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