A Competitive Firm Has a Production Function Described as Follows

question 46

Essay

A competitive firm has a production function described as follows. "Weekly output is the square root of the minimum of the number of units of capital and the number of units of labor employed per week." Suppose that in the short run this firm must use 16 units of capital but can vary its amount of labor freely.
a. Write down a formula that describes the marginal product of labor in the short run as a function of the amount of labor used. (Be careful at the boundaries.)
b. If the wage is w = $1 and the price of output is p = $4, how much labor will the firm demand in the short run?
c. What if w = $1 and p = $10?
d. Write down an equation for the firm's short-run demand for labor as a function of w and p.

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Definitions:

Aid To Management

Support or assistance provided to management teams through various tools, techniques, or resources to enhance decision-making and efficiency.

Manufacturing Overhead Budget

A financial outline estimating the expected indirect production costs, such as utilities and rent for manufacturing facilities.

Overhead Costs

Indirect expenses related to the day-to-day running of a business, such as rent, utilities, and administrative costs.

Merchandise Purchases Budget

A financial plan that estimates the cost of goods a business needs to buy to meet its sales goals.