Supposed that the firm producing leather bags has a production function of Q=5K1/3
, where Q stands for quantity produced, K stands for capital and L stands for labor.
The marginal product of labor is (10/3)(K/L)1/3
while the marginal product of capital is (5/3)(L/K)2/3.
- a. Supposed that wage is equal to 150 Php and the rent of capital is 300 Php. What will be the capital-labor ratio assuming the firm follows the least cost rule?
- b. Suppose that the firm has a fixed capital of 27 units. How many laborers should the firm hire if the current price of a leather bag is 300 Php?
- c. What is the marginal product of labor in letter b?
- d. What is the marginal revenue product of capital in letter b?