Manufacturer faces cobb-douglas production function

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Reference no: EM131092073

Assume that a manufacturer faces a Cobb-Douglas production function, q= 40K^0.5L^0.5 where q is output per period, L is labor, K is capital

A. Specify and illustrate the MP l and AP l for L = 5 to 30 units (assume that thelevel of capital (K) is 25; use increments of 5 units of labor).

B. Now assume that the firm is taking a long-run perspective. Illustrate the isoquant for q = 400 units of output. (Hint: rewrite the production function and express K as a function of the other variables).

C. Determine and illustrate the cost-minimizing use of capital and labor for 400 units of output, assuming that the price of labor is $50 per unit and the price of capital is $200 per unit. What is the total cost at the optimum input usage? Be sure to specify the isocost equation and illustrate the isocost in your diagram.

Reference no: EM131092073

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