Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 7, Problem 3.5P
(a)
To determine
Cheapest technology in a high-wage country.
(b)
To determine
Cheapest technology in a low-wage country.
(c)
To determine
Changes in employment.
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Karol has a coffee shop and produces coffee
drinks under the production function
Q = F(K,L) = 5K + L , where q is the number of
cups generated per hour, K is the number of
coffee machines (capital), and L is the number of
employees hired per hour (labor). Suppose Karol
needs to produce 500 cups of coffee and the price
of capital is 40 euro per unit and the price of labor
(wage) is 20 euro per unit. If Karol minimizes costs,
how much capital and how much labor should he
employ?
See attached image. If there is any work to show, show all work please.
The following table shows the capital and labor requirements for 10 different levels of production.
Assuming that the price of labor (PL) is $8 per unit and the price of capital (PK) is $6 per unit, compute
and graph total cost, marginal cost, and average cost for the firm.
To do this, fill in the total cost for each output level in the table below. (Enter your responses as whole
numbers.)
9
0
1
2
3
4
5
6
7
8
9
10
K
0
20
20
20
20
20
20
20
20
20
20
L
0
3
7
10
13
17
23
31
41
53
67
TC
0
Cost per unit ($)
0
1 2 3 4 5 6 7 8 9 10 11 12
Units of output
Q
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Chapter 7 Solutions
Principles of Economics (12th Edition)
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