The production function is given by F(L)=6L^2/3.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)64 B)192 C)32 D)128 E)None of the above.

Question

Quizplus · Accepted Answer

The profit-maximizing condition is MRTS=w/p, where MRTS is the marginal rate of technical substitution, w is the wage rate, and p is the price of output. In this case, MRTS=2L^-1/3 and w/p=1. Therefore, 2L^-1/3=1, which implies that L=8.

The Production Function Is Given by F(L)=6L2/3

The Production Function Is Given by F(L)=6L^2/3