capital are given as: MPL = (0.75)(0.25)Kº.25 L-0.25 MPK = (0.25)(0.25)K-0.75L0.75 a. Construct the isocost equation. b. Determine the appropriate input mix to get the greatest output for an outlay of R150,000 for a production run of memo pads. c. Compute the level of output.
capital are given as: MPL = (0.75)(0.25)Kº.25 L-0.25 MPK = (0.25)(0.25)K-0.75L0.75 a. Construct the isocost equation. b. Determine the appropriate input mix to get the greatest output for an outlay of R150,000 for a production run of memo pads. c. Compute the level of output.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Please all 3 sub-questions and round off to 2 decimal places
Transcribed Image Text:Question 1
TYPO produces memo pads in its local shop. The company can rent its equipment and hire
workers at competitive rates. Equipment needed for this operation can be rented at R52 per
hour, and labour can be hired at R12 per worker hour. The company has allocated R150,000
for the initial run of memo pads. The production function using available technology can be
expressed as:
Q=0.25K0.25 L0.75,
where Q represents memo pads (boxes per hour), K denotes capital input (units per hour), and
L denotes labour input (units of worker time per hour). The marginal products of labour and
capital are given as:
MPL = (0.75)(0.25) K⁰.25 L-0.25
MPK = (0.25)(0.25)K-0.75L0.75
a.
Construct the isocost equation.
b. Determine the appropriate input mix to get the greatest output for an outlay of
R150,000 for a production run of memo pads.
c. Compute the level of output.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education