(2) Consider a firm with the production function given by y = √LK, where y is the output, L is the labour input, and K i

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2 Consider A Firm With The Production Function Given By Y Lk Where Y Is The Output L Is The Labour Input And K I 1 (75.56 KiB) Viewed 47 times

(2) Consider a firm with the production function given by y = √LK, where y is the output, L is the labour input, and K is the capital input. The firm is in a competitive industry, and hence, the firm takes the price of the output as given. Also the factor markets are competitive and hence, the firm takes the prices of the inputs as given. Currently, the price of the labour is $15, the price of the capital is $20. (a) If the firm were to produce y = 120, how many units of the labour and the capital is it going to hire? (b) Now consider any positive amount of the output (y). Find the cost-minimizing labour and capital inputs. Note that they must be a function of y. (c) Derive the cost function based on (b). 1