1.BB 1.3 a) The production manager wants to minimize total costs TC = PE*E + PL*L. b) The constraint is to produce Q = 200 units, so the manager must choose E and L so that EL= 200. c) The endogenous variables are E and L, because those are the variables over which the production manager has control. By contrast, the exogenous variables are Q, PE, and PLbecause the production manager has no control over their values and must take them as given. d) ,min. .200E LELP EP Ls tEL+=e)The Langrange is (200)ELP EP LELλ++−. FOC wrt. E: 102ELPEλ+=; FOC wrt. L: 102LEPLλ+=. From the above two equations, we get ELPLPE=or 2EL=. Then by the constraint EL= 200 we have L=1002and E=2002. . 2.BB 1.13 a) The objective function is the number of new SUVs sold, which we can denote by Q(F, G). b) The constraint is that total spending must be less than or equal to $2million, or TS ≤$2 million.
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