This preview shows page 1. Sign up to view the full content.
Unformatted text preview: of output can be rewritten with labor as a function of output
as: In turn, the shortrun cost of production is: where w is the wage rate. Substituting Q + 3 for L, the cost function is: 9. awar d: 3.34 out of
5.00 points Suppose that the production function for Hannah and Sam's home remodeling business is
http://e z to.mhe c loud.mc gr a w hill.c om/hm.tpx? todo= pr intvie w 2/9 1/22/2014 Assignme nt Pr int Vie w Q = F(L, K) Q = 10L0.2K0.3.
Assume the wage rate is $8,000 per week and the cost of renting a unit of capital is $2,000 per week.
a. What is the leastcost input combination for remodeling 500 square feet each week? Instructions: Round your answers to 2 decimal places. 853. 20 units of labor and 5, 119. 20 units of capital. b. What is the total cost? Instructions: Round your answer to 2 decimal places. $37, 540, 800. 00 . rev is ed jrl 08112011 Worksheet Section: Cost Minimization with
Two Variable Inputs Suppose that the production function for Hannah and Sam's home remodeling business is Q = F(L, K) Q = 10L0.2K0.3.
Assume the wage rate is $8,000 per week and the cost of renting a unit of capital is $2,000 per week.
a. What is the leastcost input combination for remodeling 500 square feet each week? Instructions: Round your answers to 2 decimal places. 853.20 ± 5% units of labor and 5,119.18 ± 5% units of capital. b. What is the total cost? Instructions: Round your answer to 2 decimal places. $ 17,063,937.59 ± 5% . rev is ed jrl 08112011 Explanation:
The leastcost input combination for producing a particular level of output (Q units) is that combination where
the Qisoquant is tangent to an isocost line. The tangency condition can be restated in terms of a relationship
between the marginal rate of technical substitution, which equals the ratio of the firm's marginal products, and
the ratio of its input prices. Hannah and Sam should select the costminimizing quantities of inputs such that the marginal rate of
technical substitution for labor with capital (MRTSL K) equals th...
View Full
Document
 Fall '13
 AX
 Opportunity Cost

Click to edit the document details