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
veryspecialised 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?
2) Explain how equilibrium of the firm is achieved. Also explain (along with examples)
how profit maximizing output is determined in short run and long run for:
a. Perfect Competitive market
b. Monopoly market
c. Monopolistic market
d. Oligopoly market
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