Suppose that the firms production technology is given by Y

Suppose that the firm\'s production technology is given by Y = zF(K, N) = zK^alphaN^1-alpha, where 0

Production function: z(K^a)(N^1-a)

Cost function: C=wN+rK

Where, w is the wage rate and r is the rental rate of capital

The firm’s demand for labor can be calculated at the point the MRT of the production function is equal to the price ratio of the inputs.

MRT=(dY/dK)/(dY/dN) = aN/(1-a)K

Price ratio: w/r

Thus, at the optimal point, aN/(1-a)K=w/r

Or, N=[(1-a)wk]/ar

Hence calculated

$Suppose that the firm\'s production technology is given by Y = zF(K, N) = zK^alphaN^1-alpha, where 0 SolutionProduction function: z(K^a)(N^1-a) Cost function:$

Suppose that the firms production technology is given by Y

Solution

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