Homework 3 - ECON 1100: Intermediate Microeconomics...

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ECON 1100: Intermediate Microeconomics Instructor: Sandra Orozco Homework 3 Due date: October 6, 2010 IMPORTANT NOTE: Do not forget to label your graphs properly!!! 1. (10 points) Suppose the production of airframes is characterized by a Cobb– Douglas production function: Q = LK . Suppose the price of labor is $ 10 per unit and the price of capital is $ 1 per unit. Find the cost- minimizing combination of labor and capital if the manufacturer wants to produce 121,000 airframes. 2. (20 points) The processing of payroll for the 10,000 workers in a large firm can either be done using 1 hour of computer time ( denoted by K) and no clerks or with 10 hours of clerical time ( denoted by L) and no computer time. Computers and clerks are perfect substitutes; for example, the firm could also process its payroll using 1/ 2 hour of computer time and 5 hours of clerical time. a) (5 points) Sketch the isoquant that shows all combinations of clerical time and computer time that allows the firm to process the payroll for 10,000 workers. b) (10 points) Suppose computer time costs $ 5 per hour and clerical time costs $ 7.50 per
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This note was uploaded on 03/10/2012 for the course ECON 1100 taught by Professor Unver during the Fall '06 term at Pittsburgh.

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Homework 3 - ECON 1100: Intermediate Microeconomics...

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