A firm can produce output using two inputs: capital (K) and labor (L). The level of production that the firm can achieve can be written in terms of the amount of inputs used in the following way: Y = [A¯¹n Kª/n + B−1/n La/n] n/a, where A=7, B=14, a=1-n and n is a parameter that takes values strictly between 0 and 1. If the amount of capital used by the firm is equal to 78, how much labor the firm needs to hire in order to produce an amount of output of 120? Solve the problem by first formulating an equation.

A firm can produce output using two inputs: capital (K) and labor (L). The level of production that the firm can achieve can be written in terms of the amount of inputs used in the following way: Y = [A¯¹n Kª/n + B−1/n La/n] n/a, where A=7, B=14, a=1-n and n is a parameter that takes values strictly between 0 and 1. If the amount of capital used by the firm is equal to 78, how much labor the firm needs to hire in order to produce an amount of output of 120? Solve the problem by first formulating an equation.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.7P

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