Suppose that a furniture manufacturer produces tables. The manufacturer's production function is Q(KL)=2K0.8 0.2 where K is the number of wood saws and L is the number of labor hours used to produce tables. The prevailing wage rate is $10 per hour and the rental rate associated with wood saws is $50. The manufacturer has a goal to produce 1,000 units. What Lagrangian equation can be used to solve the manufacturer's cost minimization problem? O a. c = 2K2 s.t. 1,000 = 50K + 10L b. = 10K + 50L s. t. 1,000 = 2K102 2K002 Oc = 50K + 10L s.t. 1.000 = Od. L = 2K102 s. t. 1,000 10K + 50L

Suppose that a furniture manufacturer produces tables. The manufacturer's production function is Q(KL)=2K0.8 0.2 where K is the number of wood saws and L is the number of labor hours used to produce tables. The prevailing wage rate is $10 per hour and the rental rate associated with wood saws is $50. The manufacturer has a goal to produce 1,000 units. What Lagrangian equation can be used to solve the manufacturer's cost minimization problem? O a. c = 2K2 s.t. 1,000 = 50K + 10L b. = 10K + 50L s. t. 1,000 = 2K102 2K002 Oc = 50K + 10L s.t. 1.000 = Od. L = 2K102 s. t. 1,000 10K + 50L

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Isocost and Isoprofit Curve Analysis

An isocost curve in the production theory that is a crucial part of economics depicts different combinations of factor inputs at a given market cost. In other words, this shows all the combinations of production factors that cost the same for the firm to employ. Usually, this can be depicted as a downward sloping straight line when the firms act as the price-takers in the factor markets. The slope of this mainly depicts the relative prices of different production factors.

Question

Suppose that a furniture manufacturer produces tables. The manufacturer's production function is Q(KL)- 2K0.8 0.2
where Kis the number of wood saws and L is the number of labor hours used to produce tables. The prevailing wage rate is
$10 per hour and the rental rate associated with wood saws is $50. The manufacturer has a goal to produce 1,000 units.
What Lagrangian equation can be used to solve the manufacturer's cost minimization problem?
Oa. C = 2K12 s.t. 1,000 = 50K + 10L
b. =
Oc L =
Od. L =
10K + 50L s. t. 1,000 = 2K08102
50K + 10L s.t. 1,000= 2KL02
2K10 s. t. 1,000= 10K + 50L

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