Another firm in the same industry, Cake, considers setting up a plant in Canada and is thus evaluating its long-run production possibilities there. Besides using machinery K, it can hire labor L. The production function is q = f(K, L) = 2K0.5L 0.5 .
(a) What is the equation of the isoquant, i.e. K as a function of labor (and output)?
(b) If you reduced labour input by two (small) units, how many additional units of capital would you need to hold output constant? (2) (c) The manufacturer estimates that it will sell 36 units of its product. How many additional units of capital do you need to substitute for one (small) unit of labor when L = 6? How many do you need when you want to substitute for one (small) unit of labor when L = 12? In which case do you need more additional capital?
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more