3. The production function is given by q=20KL with MPL=20K &…
3. The production function is given by q=20KL with MPL=20K & MPK=20L. The cost of labor w=10 and the cost of capital r=20. a) The firm wants to produce 4,000 units of output. In the short run the plant’s capital is fixed at k=5. Find the amount of labor it must employ to produce 4,000 units of output. Calculate the short run total cost. Show the isocost and isoquant associated with that point (label it as point “A”). Scale: x-axis: 1 square=2 units; y-axis: 1 square=2 units. b) In the long run the firm wants to produce 4,000 units of output. Find the optimal combination of inputs. Show and label the isocost and isoquant associated with that point. Label the optimal combination of inputs as point “B”. Scale: x-axis: 1 square=2 units; y-axis: 1 square=2 units.