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:

Contingency Table

A table often used in statistics to show the frequency distribution of variables, helping in the analysis of the relationship between them.

Equality Of Variances

A statistical condition in which two or more groups have the same variance, often an assumption in certain tests of significance.

Test Statistic

A calculated value used in statistical hypothesis testing to determine whether to reject the null hypothesis.

Chi-Square Test

A statistical test used to determine whether there is a significant association between two categorical variables.