a. How many units of labor and capital should be "purchased" to maximize production subject to the budgetary constraint? Round to the nearest whole number, if necessary. Labor: L units Capital: K b. What is the maximum number of units of production under the given budgetary conditions? Round to the nearest whole number, if necessary. Maximum production: units units
a. How many units of labor and capital should be "purchased" to maximize production subject to the budgetary constraint? Round to the nearest whole number, if necessary. Labor: L units Capital: K b. What is the maximum number of units of production under the given budgetary conditions? Round to the nearest whole number, if necessary. Maximum production: units units
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter7: Production Economics
Section: Chapter Questions
Problem 7E
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Question
![Suppose a Cobb-Douglas Production function is given by
P (L, K) = 10L00.75 0.25
where L is units of labor, K is units of capital, and P (L, K) is total units that can be produced with
this labor/capital combination. Suppose each unit of labor costs $700 and each unit of capital costs
$2,100. Further suppose a total of $504,000 is available to be invested in labor and capital
(combined).
a. How many units of labor and capital should be "purchased" to maximize production subject to
the budgetary constraint? Round to the nearest whole number, if necessary.
Labor: L
=
Capital: K
-
units
Maximum production:
units
b. What is the maximum number of units of production under the given budgetary conditions?
Round to the nearest whole number, if necessary.
units](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff9a0f0b7-67e2-4454-830e-84afe24ebcb4%2F7bb79bba-0c60-4d6d-8ca4-d7c175479624%2Fhnlz2ib_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Suppose a Cobb-Douglas Production function is given by
P (L, K) = 10L00.75 0.25
where L is units of labor, K is units of capital, and P (L, K) is total units that can be produced with
this labor/capital combination. Suppose each unit of labor costs $700 and each unit of capital costs
$2,100. Further suppose a total of $504,000 is available to be invested in labor and capital
(combined).
a. How many units of labor and capital should be "purchased" to maximize production subject to
the budgetary constraint? Round to the nearest whole number, if necessary.
Labor: L
=
Capital: K
-
units
Maximum production:
units
b. What is the maximum number of units of production under the given budgetary conditions?
Round to the nearest whole number, if necessary.
units
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