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

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Suppose the production function for widgets is given by: Q = f (K, L) = 2 ∗ KL − K2/2 − L2/2 (a) Suppose L=5 (is fixed), derive an expression for and graph the total product of capital curve (the production function for a fixed level of labor) and the average productivity of capital curve. (b) At what level of capital input does the average productivity reach a maximum? How many widgets are produced at this point? (c) Again, assuming L=5, derive an expression for and graph the MPK curve. At what level of capital input does MPK =0? (d) Does this production function exhibit constant, increasing or decreasing returns to scale?
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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 of this function?
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