Suppose the Production Function Is Q = 12 L⁰

question 123

Essay

Suppose the production function is q = 12 L⁰.²⁵ K⁰.⁷⁵.Determine the long-run capital-to-labor ratio (K/L)if the cost a unit of capital (r)is three times the cost of a unit of labor (w).

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Definitions:

Factory Overhead

The indirect manufacturing costs incurred during the production process, such as utilities, maintenance, and salaried staff.

Wages Payable

The total amount of wages earned by employees that have not yet been paid by the employer.

Wages Expense

The total cost incurred by a business for paying salaries and wages to its employees during a particular period.

Finished Goods

Items that are fully manufactured but have not been sold or dispatched to the final consumer.