Question

AutoSave Off 2 O arch arch х Fi Home Insert Ivanligs Review IcW telp Share Comments 7 A) If a firm has a MPL = 10 and a MP= 15, and w=2 and 1=5, is the firm using a combination of inputs that will maximize profit? How do you know? Should the firm increase the quantity of capital or labor they are using? Determine the firm's optimal combination of labor and capital given the information below: Q= f(KL) = K05L0.5 MPL = 0.5K05-05 Q = 500 k = 100 w = 50 r= $100 MPK = 0.5K-0.5 0.5 Draw the firm's isoquant and isocost curves at the optimal combination, be sure to label any relevant points, intercepts, including their values. B) Briefly explain why marginal product is not related to returns to scale. C) Use the information and graph space below to answer the question. If a firm initially producing on an Page 1 of 2 227 words EX C Focus -- - + 100% 3:46 PM ^ a = 1)) 3/29/2020

Answer 1

A mpe = 10; MPx=15 ; w.a2 and >=5 At optimal : globe. 1 slube of isowst! = (an optimal) So, the firm is not muximizing profit .. to maximise profit the labor should be increase because . marginal oreturns in labor is greater compared to cepital. 6.5 -08 0505 k k limpiz 0.5kg menzo.skoros o.fo. = 0.5k L . At optimer: mpe ..0.5 -0.5 0.54 L Song 0.5805 2015 s.X x = 2 lo so = 2 => [200=L] cost a witok= 50(200) tlool 100) cost = $ 2000, So Isocost equation is: WL trk = 20000 50 Lt look = 20000]

-> İso quant Too 2 500 Sbo : . ₂ Isocost :200. Voor . ::.O Bl In morginal product we determine the change in output if we increase one input by. one unit... In returns to scale we determine the change in output by increesing all inputs to the same proportion a lity 21