Question

Suppose that wage (w) is $24 and rental price of capital (r) is $8. What is...

Suppose that wage (w) is $24 and rental price of capital (r) is $8. What is the long-run expansion path for a Cobb-Douglas production function ?

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

* The expansion path gives the efficient (least-cost) input combinations for every level of output. The expansion path is derived for a specific set of input prices. Along an expansion path, the input-price ratio is constant and equal to the marginal rate of technical substitution.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A firm’s production function is Q! = min(4L ,5K ). The price of labor is w...
A firm’s production function is Q! = min(4L ,5K ). The price of labor is w and the price of capital is r. a) Derive the demand function of labor and capital respectively. How does the demand of capital change with the price of capital? b) Derive the long-run total cost function. Write down the equation of the long-run expansion path. c) Suppose capital is fixed at K = 8 in the short run. Derive the short-run total cost function....
Given production function: Q=L3/5K1/5. Where L is labor, K is capital, w is wage rate, and...
Given production function: Q=L3/5K1/5. Where L is labor, K is capital, w is wage rate, and r is rental rate. What kinds of returns to scale does your firm face? Find cost minimizing level of L and K, and long run cost function.
Problem 2 Suppose that an economy’s production function is Cobb- Douglas with parameter = 0.3. c....
Problem 2 Suppose that an economy’s production function is Cobb- Douglas with parameter = 0.3. c. Suppose that a gift of capital from abroad raises the capital stock by 10 percent. What happens to total output ( in percent)? The rental price of capital? The real wage? d. Suppose that a technological advance raises the value of the parameter A by 10 percent. What happens to total output ( in percent)? The rental price of capital? The real wage?
Suppose the firm's production function is Q = K 1/3L 2/3 . a. If the rental...
Suppose the firm's production function is Q = K 1/3L 2/3 . a. If the rental rate of capital R = $30 and the wage rate W = $40, what is the cost-minimizing capital-to-labor ratio? b. If the rental rate of capital R is $35 and the wage rate W is $70, how many units of labor and capital should the firm use to produce 12 units of output?
The following is a production function. The wage rate is $10 and the rental rate r=20....
The following is a production function. The wage rate is $10 and the rental rate r=20. What is the total cost function in terms of Q? Use 4 decimal places. Q = (5L^0.5)(K^0.5) w = 10 r = 20
Suppose that the price of labor (w) is $ 6 and the price of capital (r)...
Suppose that the price of labor (w) is $ 6 and the price of capital (r) is $ 18. Assume the firm has a budget of $ 20,000 to spend on labor and capital. Also assume that the firm’s production function is Q = 4L.5 6K.5 . A. Write the equation for this firm’s isocost line. B. What is the optimal combination of inputs for this firm? Show your work. C.        At that input combination, how much output can this...
A firm’s production is represented by the following Cobb-Douglas function: ? = ?^2/3?^1/3. The rental rate,...
A firm’s production is represented by the following Cobb-Douglas function: ? = ?^2/3?^1/3. The rental rate, r, of capital is given by $200 and the price of labor is $100. a) For a given level of output, what should be the ratio of capital to labor in order to minimize costs? b) How much capital and labor should be used to produce those 300 units? c) What is the minimum cost of producing 300 units? d) What is the short...
A firm’s production is represented by the following Cobb-Douglas function: ? = ?^2/3?^1/3. The rental rate,...
A firm’s production is represented by the following Cobb-Douglas function: ? = ?^2/3?^1/3. The rental rate, r, of capital is given by $200 and the price of labor is $100. a) For a given level of output, what should be the ratio of capital to labor in order to minimize costs? b) How much capital and labor should be used to produce those 300 units? c) What is the minimum cost of producing 300 units? d) What is the short...
Suppose you own a firm that producing shoes using both capital and labor. The production function...
Suppose you own a firm that producing shoes using both capital and labor. The production function is q=f(K, L)=0.5K2 L4 . In long run both capital (K) and labor (L) are variable. Price for each pair of shoes is $50 (p=50), the wage rate is 0.04 (w=0.04) and the rental price for capital is 1 (r=1). Given those output and input prices, what is the profit maximizing input level of K and L (K* & L* )?
Suppose the hourly wage is $20 and the price of each unit of capital is $20....
Suppose the hourly wage is $20 and the price of each unit of capital is $20. The price of output is constant at $50 per unit. The production function is f(E,K) = E1/5 K1/2, How much labor and capital should the firm employ in the long run? How much profit will the firm earn?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT