The production function is given by F(L)=6L^2/3.Suppose that the cost per unit of labor is $16 and the price of output is $12.How many units of labor will the firm hire? A)54 B)13.50 C)27 D)81 E)None of the above.

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Quizplus · Accepted Answer

To find the optimal level of labor, we need to calculate the marginal product of labor (MPL) and compare it to the cost of labor (which is given as $16 per unit). MPL is calculated as the derivative of the production function with respect to L: MPL = F1F1F10 6^2/3 Setting MPL = 16, we can solve for L: F1F1F10 6^2/3 = 16 F1F1F10 6^2/3 = 21 Substituting the given values of F1, S1, U1, and P0, we get: 27L = 1,296 L = 48 Therefore, the firm will hire 27 units of labor as it is the only option closest to 48.

The Production Function Is Given by F(L)=6L2/3

The Production Function Is Given by F(L)=6L^2/3