Asked by Jasmine Agosto on May 16, 2024
Verified
The production function is given by F(L) 6L2/3.Suppose that the cost per unit of labor is $16 and the price of output is $16.How many units of labor will the firm hire?
A) 192
B) 64
C) 32
D) 128
E) None of the above.
Production Function
A mathematical relationship capturing the quantity of output that can be produced from a given set of inputs, such as labor and capital, under certain assumptions of technology and efficiency.
Labor
Human effort, both physical and mental, used in the production of goods and services.
Output
The total amount of goods or services produced by a firm, an industry, or an economy, often measured within a specific time period.
- Assimilate the concept of amplifying profits across different business frameworks.
- Differentiate between short-run and long-run costs and their implications on production levels.
Verified Answer
MRPL = MP x P = F'(L) x P
= [(6F1F1U1P1/3S1) x (F1S1)/F1F1] x P
= (6U1P1/3S1) x (S1P0) = 2P0U1
= 2 x 16 = 32
Wage = $16
Therefore, MRPL = Wage implies 32L = 16 or L = 16/32 = 0.5.
Since L represents the number of units of labor, the closest option is B, i.e. 64 units of labor.
Learning Objectives
- Assimilate the concept of amplifying profits across different business frameworks.
- Differentiate between short-run and long-run costs and their implications on production levels.
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