Alex Fiani Corporation produces egg cartons that are sold to egg distributors. Alex Fiani Corporation has estimated this production function for its egg carton division:
Q = 25L0.6K0.4,
where Q = output measured in one thousand carton lots, L = labor measured in person hours, and K = capital measured in machine hours. Alex currently pays a wage of $10 per hour and considers the relevant rental price for capital to be $25 per hour.
Derive
a. Derive MPL
b. Derive MPK
c. Solve for MRTS using mpl and mpk
d. Determine the optimal capital labor ratio that Acme should use in the egg carton division