Suppose the production function for a bakery is:
Q = 4K^0.4L^0.6
Where Q is the number of loaves of bread produced per day, K is the number of ovens, and L is the number of workers employed. Suppose that the wage rate is $5 per hour and the rental rate of capital is $10 per hour. The firm's expansion path is ____.

Question

Quizplus · Accepted Answer

The expansion path is determined by the ratio of the marginal products of labor and capital, which is equal to the ratio of their prices. Given the production function, the ratio of marginal products is (0.6/0.4) * (K/L) = 5/10, simplifying to K = 0.5L.

Suppose the Production Function for a Bakery Is