Quiz6_F10 - The Initial Total Cost = The Minimized Total...

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3550 F10 Quiz 6 Last Name: First Name: 1. (5 points) Suppose you are hired as a new manager of a firm producing 20 units of output with 10 units of labor and 4 units of capital. Assume the price of labor is $60 and the price of capital is $100 . K d c b a Q = 20 7 8 9 10 L Given the above graph and table: a. In detail, explain the optimizing decisions for minimize cost assuming you can only hire whole numbers of workers but it is possible to hire non-integer units of capital. (Hint: think about the MC and MB of changing L). b. To minimize cost, you should use ________ laborers and _____________ units of capital. (It is possible to hire non-integer units of capital) c. How much total cost will you be able to save by changing the input combination?
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Unformatted text preview: The Initial Total Cost = The Minimized Total Cost = more on other side… 4 4.4 6 5 3550 F10 Quiz 6 Last Name: First Name: 2. (5 point) Peggy’s flooring store currently uses 10 units of capital and 50 units of labor. With this input mix in the short run, the MP K = 36 and the MP L =20 and she is producing a total 600 units of output per day. The price of capital is $18 per hour and the price of labor is $6 per hour. Show this situation in an isoquant-isocost diagram. a. Explain, and show in the diagram above, how Peggy can produce the same output at a lower total cost. (minimizing TC given Q) b. Explain, and show in the diagram above, how Peggy can produce more output at the same total cost. (maximizing Q given TC)...
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Quiz6_F10 - The Initial Total Cost = The Minimized Total...

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