nomework.nomework # 5 fall 2017 Score: 0 of 5 pts X) Exercise 11 Suppose that a

Question

nomework.nomework # 5 fall 2017 Score: 0 of 5 pts X) Exercise 11 Suppose that a firm's production function is 17 of 23 (22 complete) HW Score: 75.76% Quest 10L95k0 Its marginal product functions are: and The cost of a unit of labor, w is $20 and the cost of a unit of capital. r is $80 Isoquants for output of 140 and 280 are illustrated in the figure to the right Initially, the firm is producing 140 units of output and has determined that the cost-minimizing quantities of labor and capital are 28 and 7, respectively 4 280 Suppose now that the firm wants to increase output to 280 units. If capital is fixed in the short run, how much labor will the firm require? 14 56 L Units of labor 84 98 112 The firm will now require units of labor. (Enter your response roundel to two Enter your ansiwer in the k and then click Check Answ

Explanation / Answer

Given that at q=140, the firm was using 28 units of labour and 7 units of capital.

If the firm now wants to produce q=280 units of output by keeping capital fixed, this means k = 7 units.

thus, putting the values in the production function,

280 = 10 (L)^0.5 (7)^0.5, we get L = 112 units of labour.

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