Illustrate what combination of inputs the plant

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Reference no: EM13101264

Q Suppose that a semiconductor plant's production function is q = 5LK, where q is its output rate, L is the amount of labour it uses per period of time and K is the amount of capital it uses per period of time. Suppose that the price of labour is $1 a unit and the price of capital is $2 a unit.

a. The firm's vice president for manufacturing hires you to figure out illustrate what combination of inputs the plant should use to produce 20 units of output per period. Illustrate what advice would you give? Explain.

b. The same as in (a) but the plant needs to produce 40 units of output. Explain.

c. Compare your answers to part (a) and (b) and explain the scale effect. Explain.

d. The same as in (a) but the price of labour has risen to $2 a unit. Explain.

Reference no: EM13101264

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