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2. At Albert's Pretzel Company, pretzels (Q) are produced using workers (L) and pretzel-making machines (K) according to the production function Q(L,K) = KL + K. The hourly cost of pretzel machines is $10, and the hourly cost of workers is $40. Where appropriate, round to 2 decimal places. a. Suppose Albert wishes to produce 10,000 pretzels at minimum cost. How many hours of machines and workers should he employ to minimize cost? How much will it cost to produce 10,000 pretzels? b. An order arrives, doubling the number of pretzels Albert must produce. Assuming he is unable to purchase more pretzel-making machines in the short-run, how much will it cost to meet the new production level? c. In the long-run, Albert will be able to employ more machines as well as workers. If he now produces 20,000 pretzels at minimum cost, how much will it cost? d. Use an optimal choice diagram (isoquants and isocost lines) to graphically illustrate your answers to (b) and (c). Use this graph to compare your long-run and short-run input levels as well as your long-run and short-run costs.

2. At Albert's Pretzel Company, pretzels (Q) are produced using workers (L) and pretzel-making machines (K) according to the production function Q(L,K) = KL + K. The hourly cost of pretzel machines is $10, and the hourly cost of workers is $40. Where appropriate, round to 2 decimal places. a. Suppose Albert wishes to produce 10,000 pretzels at minimum cost. How many hours of machines and workers should he employ to minimize cost? How much will it cost to produce 10,000 pretzels? b. An order arrives, doubling the number of pretzels Albert must produce. Assuming he is unable to purchase more pretzel-making machines in the short-run, how much will it cost to meet the new production level? c. In the long-run, Albert will be able to employ more machines as well as workers. If he now produces 20,000 pretzels at minimum cost, how much will it cost? d. Use an optimal choice diagram (isoquants and isocost lines) to graphically illustrate your answers to (b) and (c). Use this graph to compare your long-run and short-run input levels as well as your long-run and short-run costs.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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2. At Albert's Pretzel Company, pretzels (Q) are produced using workers (L) and pretzel-making machines (K) according to the production function Q(L,K) = KL + K. The hourly cost of pretzel machines is $10, and the hourly cost of workers is $40. Where appropriate, round to 2 decimal places. a. Suppose Albert wishes to produce 10,000 pretzels at minimum cost. How many hours of machines and workers should he employ to minimize cost? How much will it cost to produce 10,000 pretzels? b. An order arrives, doubling the number of pretzels Albert must produce. Assuming he is unable to purchase more pretzel-making machines in the short-run, how much will it cost to meet the new production level? c. In the long-run, Albert will be able to employ more machines as well as workers. If he now produces 20,000 pretzels at minimum cost, how much will it cost? d. Use an optimal choice diagram (isoquants and isocost lines) to graphically illustrate your answers to (b) and (c). Use this graph to compare your long-run and short-run input levels as well as your long-run and short-run costs.
Transcribed Image Text:2. At Albert's Pretzel Company, pretzels (Q) are produced using workers (L) and pretzel-making machines (K) according to the production function Q(L,K) = KL + K. The hourly cost of pretzel machines is $10, and the hourly cost of workers is $40. Where appropriate, round to 2 decimal places. a. Suppose Albert wishes to produce 10,000 pretzels at minimum cost. How many hours of machines and workers should he employ to minimize cost? How much will it cost to produce 10,000 pretzels? b. An order arrives, doubling the number of pretzels Albert must produce. Assuming he is unable to purchase more pretzel-making machines in the short-run, how much will it cost to meet the new production level? c. In the long-run, Albert will be able to employ more machines as well as workers. If he now produces 20,000 pretzels at minimum cost, how much will it cost? d. Use an optimal choice diagram (isoquants and isocost lines) to graphically illustrate your answers to (b) and (c). Use this graph to compare your long-run and short-run input levels as well as your long-run and short-run costs.
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