1. The marginal product of labour in a production process is statistically estimated as MPL
= 10(K/L)^0.5
Currently the process is using 100 units of K and 121 units of L. Given the
Very specialised nature of capital equipment K it takes about a year to increase K; but the
rate of labour input L can be varied daily. If the wage rate is $ 10 per unit and the price
of output is $2 per unit is the firm operating efficiently in the short run? If not explain
why. Also determine the optimal rate of labour input.
1. The marginal product of labour in a production process is statistically estimated as MPL
= 10(K/L)^0.5
Currently the process is using 100 units of K and 121 units of L. Given the
Very specialised nature of capital equipment K it takes about a year to increase K; but the
rate of labour input L can be varied daily. If the wage rate is $ 10 per unit and the price
of output is $2 per unit is the firm operating efficiently in the short run? If not explain
why. Also determine the optimal rate of labour input. On what factors does the labourefficiency
depend?
***********************************************************************
Attachments: