Assume that you are a manager for Haworth —one of the major manufacturers of office furniture. You recently hired an economist to work with engineering and operations experts to estimate the production function for a particular line of office chairs. The report from these experts indicates that the relevant production function is Q = 2(K) 1/2 (L)1/2 where K represents capital equipment and L is labor. Hanworth has already spent a total of $10,000 on the 4 units of capital equipment it owns. Due to current economic conditions, the company does not have the flexibility needed to acquire additional equipment. The workers at the firm are paid a competitive wage of $100. Also, the chairs can be sold for $200 each. Given the competitive wage of workers which is $100 and the price of chairs, what is your profit- maximizing level of output and labor usage? what is your maximum profit?
Assume that you are a manager for Haworth —one of the major manufacturers of office furniture. You recently hired an economist to work with engineering and operations experts to estimate the production function for a particular line of office chairs. The report from these experts indicates that the relevant production function is Q = 2(K) 1/2 (L)1/2 where K represents capital equipment and L is labor. Hanworth has already spent a total of $10,000 on the 4 units of capital equipment it owns. Due to current economic conditions, the company does not have the flexibility needed to acquire additional equipment. The workers at the firm are paid a competitive wage of $100. Also, the chairs can be sold for $200 each.
Given the competitive wage of workers which is $100 and the price of chairs, what is your profit-
maximizing level of output and labor usage?
what is your maximum profit?
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