Question

1. Suppose the hourly wage is $10 and the price of each units of capital is $25. The price of output is constant at $50 per unit. The production function is: q = L0.5 K0.5

Suppose that the current capital stock is fixed at 1600 units.​

Answer 1

To correct the errors in parallel structure, you can rewrite the sentences as follows:

1. Suppose the hourly wage is $10, the price of each unit of capital is $25, and the price of output is constant at $50 per unit. The production function is q = L^0.5 * K^0.5.

2. Suppose that the current capital stock is fixed at 1600 units.

Answer 2

In the short run, the firm's output is directly proportional to the square root of the amount of labor employed, multiplied by 40.

Step-by-step explanation:

In the short run, the firm has fixed capital, meaning that only one personal computer (PC) is available. The production function, Q = f[L, K], indicates that the amount of output is solely dependent on the amount of labor employed. Let's assume that the current capital stock is fixed at 1600 units.

To calculate the output, we can use the production function, q = L0.5 K0.5. Since the capital stock is fixed at 1600 units, we substitute this value into the equation to get:

q = L0.5 (1600)0.5

Simplifying further:

q = L0.5 * 40

So, the firm's output is directly proportional to the square root of the amount of labor employed, multiplied by 40.