2. (Short-run costs, Evren wants to go into the donut business. For $500 per month he can rent a bakery complete with all the equipment he needs to make a dozen different kinds of donuts (K=1, r= 500). He must pay unionized donut bakers a monthly salary of $400 each. He projects his monthly production function to be Q = 5KL where Q is tons of donuts. a. With the current level of capital, what is the marginal product of labor? Is the marginal product diminishing? Explain. b. If Evren, wishes to make 25 tons of donuts, how many bakers are required given the current level of capital? How much will it cost to produce this (total cost)? c. Derive Evren's short-run cost function with K = 1. d. Derive the marginal cost curve from your answer to c. and show the relationship between the marginal cost and marginal product of labor.
2. (Short-run costs, Evren wants to go into the donut business. For $500 per month he can rent a bakery complete with all the equipment he needs to make a dozen different kinds of donuts (K=1, r= 500). He must pay unionized donut bakers a monthly salary of $400 each. He projects his monthly production function to be Q = 5KL where Q is tons of donuts. a. With the current level of capital, what is the marginal product of labor? Is the marginal product diminishing? Explain. b. If Evren, wishes to make 25 tons of donuts, how many bakers are required given the current level of capital? How much will it cost to produce this (total cost)? c. Derive Evren's short-run cost function with K = 1. d. Derive the marginal cost curve from your answer to c. and show the relationship between the marginal cost and marginal product of labor.
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
Problem 1RQ
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Can you. help me with d) as I am kind on stuck, thanks in advance it will be appreciated
Transcribed Image Text:2. (Short-run costs, Evren wants to go into the donut business. For $500 per month he can rent a
bakery complete with all the equipment he needs to make a dozen different kinds of donuts (K=1, r=
500). He must pay unionized donut bakers a monthly salary of $400 each. He projects his monthly
production function to be
Q = 5KL
where Q is tons of donuts.
a. With the current level of capital, what is the marginal product of labor? Is the marginal product
diminishing? Explain.
b. If Evren, wishes to make 25 tons of donuts, how many bakers are required given the current level of
capital? How much will it cost to produce this (total cost)?
c. Derive Evren's short-run cost function with K = 1.
d. Derive the marginal cost curve from your answer to c. and show the relationship between the marginal
cost and marginal product of labor.
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