(Exam question 2017)
Davy metal company produces
brass fittings. Davy’s engineers estimate that production function represented
below as relevant for their long run capital-labor decisions.
Q=500L0.6K0.4
Where Q=annual output
measured in kilograms
L=labor measured in person
hours
K=capital measured in machine
hours
Davy’s employees are
relatively highly skilled and earn $15 per hour. The firm estimates a rental
charge of $50 per hour on capital. Davy forecasts annual costs of $500,000 per
year, measured in dollars.
i) Derive the firm’s marginal
product of labor (MPL) and marginal product of capital (MPK).
ii) How much capital and
labor should the firm employ.
Send the answer to my email normizan@uum.edu.my
State you name and metric number.
