HW chap 8-2

# Mhe c loudmc gr a w hillc omhmtpx todo pr intvie w 29

This preview shows page 1. Sign up to view the full content.

This is the end of the preview. Sign up to access the rest of the document.

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

{[ snackBarMessage ]}

Ask a homework question - tutors are online