Suppose a Cobb-Douglas Production function is given by the following:P(L, K) = 90L0.75 K0.25where L is units of labor, K is units of capital, and P(L, K) is total units that can be produced with thislabor/capital combination. Suppose each unit of labor costs $1,000 and each unit of capital costs $3,000.Further suppose a total of $480,000 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 yourbudgetary 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 youranswer to the nearest whole unit.)Max production=units

The objective of the question is to determine the optimal allocation of labor and capital to…

Answered: Suppose a Cobb-Douglas Production…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

How would you determine that a two-input Cobb-Douglas production function has decreasing returns to scale (DRS), increasing returns to scale (IRS) or constant returns to scale (CRS) depending on whether α1 + α2 is larger than, smaller than, or equal to one?
You are given the production function: Q(K,L)=10KαLβ Does the above function exhibit increasing, decreasing or constant return to scale? Illustrate why and explain what this means.
The equation below is a production function, Q = (200)L + (100)K – (0.2)L2 – (0.1)K2 , where Q is output, L is labor and K is capital. What is the Marginal Product of Labor and capital of this function?
Consider the production function: F(L, K) = L0:2K0.7. %3D The wage rate (price per unit of labour) is w = 2 and the capital rental rate (price per unit of capital) is r = 7. (a) Does this production function exhibit increasing, decreasing or constant returns to scale? Explain. What is the marginal productivity of labour and the marginal productivity of capital for (L, K) = (1,1)? Would a firm (which minimises costs) use this combination of labour and capital? Explain. If your answer is yes, then what would be the quantity of production for which the company would use this combination? r (b) Compute the quantity of labour and capital that this firm would use to produce y = 2 at the minimum cost. How much would this cost be? What is the average cost and the marginal cost for that production level? Hint: for this part, you can use directly (without providing the derivation) any results derived in the lecture or tutorials. (c) Derive the equation of the isoquant for y = 2 (with K in the…
Suppose that a production function for labor (L) and capital (K) is given by: q(L,K) = L K0.2 . Does this production function exhibit constant, increasing, or decreasing returns to scale? A. Increasing returns to scale B. Constant returns to scale C. Decreasing returns to scale
pls solve
Q3, A firm operates with the following Cobb-Douglas production function where Q is output, L is labor hours per week, and K is machine hours per week. Cobb-Douglas Production Function: Q = 5(L1/3K2/3) The firm intends to produce 5,000 units of output per week by contracting employees for $40 per hour and renting machinery for $10 per hour. Determine the cost minimizing combination of labor and capital for the firm. Based on your solution in part (a), calculate the firm’s total cost of producing 5,000 units of output per week.
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?
oj Consider the Cobb-Douglas production function P(L, K) = 6L0.6 K04_ Find the %3D total units of production when 19 units of labor and 12 units of capital are invested.
Consider the following production functions, to be used in this week’s assignment:(A) F(L, K) = 20L^2 + 20K^2(B) F(L, K) = [L^1/2 + K^1/2]^2 (i) Neatly draw the Q = 2,000 isoquant for a firm with production function (A) given above,putting L on the horizontal axis and K on the vertical axis. As part of your answer, calculate three inputbundles on this isoquant. (ii) Neatly draw the Q = 10 isoquant for a firm with production function (B) givenabove. As part of your answer, calculate three input bundles on this isoquant. For your three input bundles,choose one with L = 0, choose one with K = 0, and the third with L = K. PLEASE SHOW ALL WORK
No written by hand solution

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

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

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

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

SEE MORE TEXTBOOKS