Answered: Bob the builder, a contractor, uses…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

a) Find Bob the builder’s total cost function. Use the cost minimization conditions to find Bob the builder’s conditional demand for labor L^(q) and equipment K^(q).

b) Substitute the conditional demand for labor and equipment and the current wage rate and rental cost of equipment in the expression TC = wL^(q) + rK^(q).

c) Suppose Bob charges $4,000 for each veranda, how many verandas does he build? How many workers does he hire? How many pieces of equipment does he rent?

Problem 4 (review cost minimization)
Bob the builder, a contractor, uses hired labor and equipment to add verandas to his client's homes. The market for verandas is perfectly
competitive. Bob's production function is q = 12L!/³K!/3, Suppose the wage rate is $1,000 while the rental cost of equipment is $8,000.

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