1. Suppose that a producer has the following production function: Q = KL6 Where Q is output, and L and K are man-hours and machine-hour the two inputs used in the production process. 1A) Set up the cost minimization problem as shown in class - In the cost minimization problem, the cost is minimized subject to constraint production function. It is indicated as follows: Minimize wL + rK subject to constraint Q = K!3 L16 A = wL + rK +. (Q-K3-L'6) The Lagrange f unction is differentiated by K and L to calculate the minimize the cost, and W = wage rate L= Labor %3D R= real interest rate K= capital Q = output A= parameter coefficient 1B) Determine the cost-minimize ratio of inputs where capital costs $1 per machine-hour and labor costs $4 per lab- hour. - MRTS = Marginal product of labor Marginal product of capital Q = KL16

1. Suppose that a producer has the following production function: Q = KL6 Where Q is output, and L and K are man-hours and machine-hour the two inputs used in the production process. 1A) Set up the cost minimization problem as shown in class - In the cost minimization problem, the cost is minimized subject to constraint production function. It is indicated as follows: Minimize wL + rK subject to constraint Q = K!3 L16 A = wL + rK +. (Q-K3-L'6) The Lagrange f unction is differentiated by K and L to calculate the minimize the cost, and W = wage rate L= Labor %3D R= real interest rate K= capital Q = output A= parameter coefficient 1B) Determine the cost-minimize ratio of inputs where capital costs $1 per machine-hour and labor costs $4 per lab- hour. - MRTS = Marginal product of labor Marginal product of capital Q = KL16

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A5
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