You are a manager for a company that manufactures office furniture. To estimate the production function for a particular line of office chairs, you hired an economist to work with engineering and operations experts. The report from these experts indicates that the relevant production function is ? = 2?½?½ where K represents capital equipment and L is labour. Workers at the firm are paid a competitive wage of 120 cedis per day and chairs can be sold for 400 cedis each. a. Your company has already spent a total of 8,000 cedis on the 9 units of capital equipment it owns. Due to current economic conditions, the company does not have the flexibility needed to acquire additional equipment. i. Is this firm operating in the short-run or in the long-run? Explain your choice. ii. what is your profit-maximizing level of output and labour usage? iii. What is your maximum profit
You are a manager for a company that manufactures office furniture. To estimate the production function for a particular line of office chairs, you hired an economist to work with engineering and operations experts. The report from these experts indicates that the relevant production function is ? = 2?½?½ where K represents capital equipment and L is labour.
Workers at the firm are paid a competitive wage of 120 cedis per day and chairs can be sold for 400 cedis each.
a. Your company has already spent a total of 8,000 cedis on the 9 units of capital equipment it owns. Due to current economic conditions, the company does not have the flexibility needed to acquire additional equipment.
i. Is this firm operating in the short-run or in the long-run? Explain your choice.
ii. what is your profit-maximizing level of output and labour usage?
iii. What is your maximum profit?
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