04 Jun Question 1. A new shop has opened and has the following production function:
Question
1. A new shop has opened and has the following production function:
f(E,K) = E0..6 K0.35
The price of output is $22, the wage rate is $8, and the rental rate for capital is $10 per unit.
a. Find the short-run profit maximizing level of labor demand if capital is fixed at 400 units.
b. Find the long-run profit maximizing level of labor demand and capital demand.
c. Find the long-run the elasticity. You do not need to show your math on the answer page you submit for grading.
d. If wages change to $10, which effect is stronger for capital, substitution or scale?
2. A shop has the following production function:
f(E,K) = 2E3/5 K1/7
The price of output is $20, the wage rate is $7, and the rental rate for capital is $5 per unit.
a. Find the short-run profit maximizing level of labor demand if capital is fixed at 30 units.
b. Find the long-run profit maximizing level of labor demand and capital demand.
c. If wages change to $9, which effect is stronger for capital, substitution or scale?
3. A shop has opened and has the following production function:
f(E,K) = 3E3/5 K3/4
The price of output is $18, the wage rate is $8, and the rental rate for capital is $9 per unit.
a. Find the short-run profit maximizing level of labor demand if capital is fixed at 25 units.
b. Find the long-run profit maximizing level of labor demand and capital demand. Do not state Q=K=E=infinity since increasing returns to scale. Instead maximize the function and find optimal Q, E, and K.
c. Find the long-run the elasticity. You do not need to show your math on the answer page you will submit for grading.
d. Interpret the elasticity from part c. Does it make sense? Why or why not?
e. In class it was stated that increasing returns to scale long run results are Q=K=E=infinity, prove this is true. Hint look at your answer from a and b.
4. A firm uses 1 capital for every 5 workers to produce 1 output. The price of output is $75, the wage rate is $8, and the rental rate for capital is $2 per unit. Assume capital is not a fixed cost.
a. What is the profit maximizing level of labor demand if K=5?
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.