A single product firm intends to produce 20 units of output as cheaply as possible. By using K units of capital and L units of labour, it can produce √K+L units. Suppose the prices of capital and labour are 1 dollar and 20 dollars respectively, the firm's problem is then: Min k+20L St. √K+L Find the optimal choices of L and K and the optimal cost of producing 31 units rather than 30 units.
A single product firm intends to produce 20 units of output as cheaply as possible. By using K units of capital and L units of labour, it can produce √K+L units. Suppose the prices of capital and labour are 1 dollar and 20 dollars respectively, the firm's problem is then: Min k+20L St. √K+L Find the optimal choices of L and K and the optimal cost of producing 31 units rather than 30 units.
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter3: Benefits, Costs, And Decisions
Section: Chapter Questions
Problem 5MC
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A single product firm intends to produce 20 units of output as cheaply as possible. By using K units of capital and L units of labour, it can produce √K+L units. Suppose the prices of capital and labour are 1 dollar and 20 dollars respectively, the firm's problem is then:
Min k+20L
St. √K+L
Find the optimal choices of L and K and the optimal cost of producing 31 units rather than 30 units.
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