The economist for the ABC Truck Manufacturing Corporation has calculated a production function for the manufacture of their medium-size trucks as follows: Q = 1.3 * (LO.75) * (K0.3) Where Q is the number of trucks produced per week, L is the number of labor hours per day and K is the daily

The economist for the ABC Truck Manufacturing Corporation has calculated a production function for the manufacture of their medium-size trucks as follows: Q = 1.3 * (LO.75) * (K0.3) Where Q is the number of trucks produced per week, L is the number of labor hours per day and K is the daily

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume there is a linear isoquant where the input combination  K = 10, L = 0 produces Q = 100. Assume that this isoquant has a MRTS (marginal rate of technical substitution) such that an increase in L by 1 unit requires the firm to give up – ½ unit of K. Assume PL = $1 and PK = $1. What is the smallest total cost necessary to produce Q = 100? $20 $10 $50 $100
Assume there is a linear isoquant where the input combination  K = 10, L = 0 produces Q = 100. Assume that this isoquant has a MRTS (marginal rate of technical substitution) such that an increase in L by 1 unit requires the firm to give up – ½ unit of K. Assume PL = $1 and PK = $1. What is the smallest total cost necessary to produce Q = 100?
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