A new shop has opened and has the following production function:
The price of output is $20, the wage rate is $11, and the rental rate for capital is $8 per unit.
a. Find the short-run profit maximizing level of labor demand if capital is fixed at 40 units.
b. Find the long-run profit maximizing level of labor demand and capital demand.
c. Find the long-run the elasticity. You do not need to show your math on the answer page you will submit for grading.
d. If wages change to $10, which effect is stronger for capital, substitution or scale?