Suppose a Cobb-Douglas Production function is given by the following: P(L, K) = 70L0.9K®1 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 $1,000 and each unit of capital costs $7,000. Further suppose a total of $2,800,000 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 your budgetary constraint? Units of labor, L - Units of capital, K - B) What is the maximum number of units of production under the given budgetary conditions? (Round your answer to the nearest whole unit.) Max production units

Suppose a Cobb-Douglas Production function is given by the following: P(L, K) = 70L0.9K®1 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 $1,000 and each unit of capital costs $7,000. Further suppose a total of $2,800,000 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 your budgetary constraint? Units of labor, L - Units of capital, K - B) What is the maximum number of units of production under the given budgetary conditions? (Round your answer to the nearest whole unit.) Max production units

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that a firm's production function is Q = F(L) = -1L³-30L² + 5,000L. Its marginal product of labor is MPL = -3L2-60L +5,000. a. At what amount of labor input are the firm's average and marginal product of labor equal (other than at L = 0)? Instructions: Enter your answer as a whole number. units. b. Confirm that the average and marginal product curves satisfy the relationship discussed in the text. When the amount of labor input is less than the quantity identified in your answer above, the marginal product of labor is greater than the average product of labor. When labor is greater than the amount identified above, the marginal product of labor is less than the average product of labor.
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