Suppose That a Firm's Production Function Is Given by Q

question 27

Essay

Suppose that a firm's production function is given by Q = KL (MP_K = L and MP_L = K), where Q is quantity of output, K is units of capital, and L is units of labor. The price per unit of labor and capital are $30 and $20, respectively.
a. How many units of labor and capital should the firm use if it wants to minimize the cost of producing 600 units of output?
b. Suppose that the firm makes a technological change, transforming its production function to Q = 1.23KL (MP_K = 1.23L and MP_L = 1.23K). What is the minimum cost of producing 600 units of output?

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