Economics 11
Solutions to HW8
1a) Cost to produce 1 glass of grape juice
Production function:
J
min
L
,
G
Therefore,
J
L
G
.
Cost function:
C
J
p
L
L
p
G
G
J
.2
1.5
1.7
J
The cost of producing 1 glass of grape juice is 1.7
b) The cost of producting
J
glasses of grape juice is 1.7
J
c) One employee works 8 hours per day.
L
≤
8
60
480
Since
J
L
,
J
≤
480.
d) Price of grape juice is $1 per glass.
J
J
−
1.7
J
−
.7
J
The company won’t produce any grape juice at these prices since they are losing money if
they do so.
e) Price of grape juice is $2.50 per glass.
J
2.5
J
−
1.7
J
.8
J
To maximize profits they should produce at their total capacity. Therefore
J
480.

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