A firm's production function is: q = 16L1/2K1/3 where q is the firm's hourly total product, L is the quantity of labor employed, and K is the quantity of capital employed. Assume that the quantity of capital employed is fixed at 125 units per hour. The labor market is perfectly competitive, and the current wage, w, is $10 per hour. The firm sells its product in a perfectly competitive market and the price is $5 per unit. a. What is the firm's value of marginal product of labor? b. What is the firm's profit maximizing quantity of labor?
A firm's production function is: q = 16L1/2K1/3 where q is the firm's hourly total product, L is the quantity of labor employed, and K is the quantity of capital employed. Assume that the quantity of capital employed is fixed at 125 units per hour. The labor market is perfectly competitive, and the current wage, w, is $10 per hour. The firm sells its product in a perfectly competitive market and the price is $5 per unit. a. What is the firm's value of marginal product of labor? b. What is the firm's profit maximizing quantity of labor?
Microeconomics A Contemporary Intro
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ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter7: Production And Cost In The Firm
Section: Chapter Questions
Problem 19PAE
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A firm's production function is:
q = 16L1/2K1/3
where q is the firm's hourly total product, L is the quantity of labor employed, and K is the quantity of capital employed. Assume that the quantity of capital employed is fixed at 125 units per hour. The labor market is
a. What is the firm's value of marginal product of labor?
b. What is the firm's profit maximizing quantity of labor?
Expert Solution
Step 1
Marginal product of labor (MP) can be calculated as follows.
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