Crew Brew produces a popular brand of beer in its mini-brewery located on a small river in Wisconsin. It uses a special formula, combined with the fresh water from the local stream, to produce a drink popular with local folks and tourists who visit during the summer fishing season, and autumn deer hunting season. The production function of Crew follows the formula: Q=50(K+L)Where Q = Barrels of beer, K = units of capital, and L = units of labor. a) Suppose that capital can be purchased for $8 per unit, and labor costs $6 per unit. What is the optimal combination of inputs for the firm to employ? b) Suppose that the cost of inputs changes to $7 for a unit of capital, and $9 for a unit of labor. What is the new optimal combination of inputs?
Problem # 2
Crew Brew produces a popular brand of beer in its mini-brewery located on a small river in Wisconsin. It uses a special formula, combined with the fresh water from the local stream, to produce a drink popular with local folks and tourists who visit during the summer fishing season, and autumn deer hunting season. The production function of Crew follows the formula:
Q=50(K+L)Where Q = Barrels of beer,
K = units of capital, and L = units of labor.
a) Suppose that capital can be purchased for $8 per unit, and labor costs $6 per unit. What is the optimal combination of inputs for the firm to employ?
b) Suppose that the cost of inputs changes to $7 for a unit of capital, and $9 for a unit of labor. What is the new optimal combination of inputs?
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