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A firms production function is given by Q = K^L. The marginal products of labor and capital are,
respectively, MPL=K^2 and MPK=2KL. Further, the wage rate is r=20 and the rental rate of
capital is w=10. In a short run the firm capital is fixed on K=10 and they hire 80 units of labor to
minimize their cost. How much more the firm can cut its costs in the long run to produce the
same level of output?
A.
400
B.
not enough information
C.
600
D.
1000

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  • 1. A firms production function is given by Q = K^L. The marginal products of labor and capital are, respectively, MPL=K^2 and MPK=2KL. Further, the wage rate is r=20 and the rental rate of capital is w=10. In a short run the firm capital is fixed on K=10 and they hire 80 units of labor to minimize their cost. How much more the firm can cut its costs in the long run to produce the same level of output? A. 400 B. not enough information C. 600 D. 1000