Econ 205 Production Function Assignment

Econ 205 Production Function Assignment - Asmt 3 Page 1...

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Asmt 3 Page 1 Economics 205 UNIVERSITY OF VICTORIA Managerial Economics Spring Term, 2014 Assignment 3 Solutions Due: Thursday, March 6 , 2014 , 3 pm. (In the boxes marked “ECON 205" near the Economics Department Office.) Show your work! Question 1: Textbook question page 314, #1. (3 marks) Given: Q K L = 100 0 5 0 5 . . ,C=$1000, w=$30 and r =$40, show how to determine the amount of labour and capital that the firm should use in order to maximize output? Q K L C C wL rK w r MP r MP w L K K L L K K L Cost function L L L L K Q k L = = = + = = = = = = = + = = = = = = 100 1000 30 40 50 40 50 30 1500 2000 0 75 1000 0 75 40 30 1000 60 16 67 0 75 16 67 12 5 100 12 5 16 67 144352 0 5 0 5 0 5 0 5 0 5 0 5 0 5 0 5 . . . . . . . . . : ( . ) . . ( . ) . ( . ) ( . ) . Question 2: Textbook question page 314 , #3. (3 marks) Given: Q K L = 100 0 5 0 5 . . , w=$50, and r =$40, show how to determine the amount of labour and capital that the firm should use in order to minimize the cost of producing 1118 units of output. What is this minimum cost?
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