Consider a firm with the production function: Q = 2K^0.5L^0.4 The total cost function of the firm is: TC = wL + rK + FC Assume the prices for labor (w) and capital (r) are $10 and $20 dollars respectively. Further, assume the firm's fixed cost is $20 and its predetermined level of total cost is $3,040. What would be the profit maximizing level of output?
Added by Pedro C.
Step 1
First, we need to find the firm's total cost function in terms of Q (output). We can do this by substituting the production function into the total cost function: TC = wL + rK + FC TC = 10L + 20K + 20 (since FC = $20) TC = 10L + 20(2Q^{2/5}) + 20 (since K = Show more…
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