Explore BrainMass

Explore BrainMass

    optimal level of production for the firm

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

    A firms output level is 3,000 units. Their market price for its output is $1.00 per unit. Their production function is q=10*K^.5L^.5
    K is fixed at 225 hours and L is 400 hours. the hourly wage rate is $6 and hourly rental rate for K is $8.
    Should the firm shutdown?

    © BrainMass Inc. brainmass.com October 9, 2019, 5:03 pm ad1c9bdddf

    Solution Preview

    The cost of production is TC = K*r + w*L = 225*8 + 400*6 = 4200
    Total Sales = 3000*1=3000
    At current production level the firm is making losses.

    To know what is the appropriate decision, let us ...

    Solution Summary

    This posting calculates what is the optimal level of production for the firm.