1. The production function for a competitive firm is Q = K.5L.5. The firm sells its output at a price of $10, and can hire labor at a wage of $5. Capital is fixed at one unit and costs $2. The maximum profits are:
2. The production function is Q = K.6 L.4. The marginal rate of technical substitution is:
Suppose the marginal product of labor is 8 and the marginal product of capital is 2. If the wage rate is $4 and the price of capital is $2, then in order to minimize costs the firm should use:
A. more capital and less labor.
B. more labor and less capital.
C. three times more capital than labor.
D. none of the answers are correct.