An entrepreneur owns a factory with two plants that produce the same skateboards but differ in the amount of capital and Labor in them. They are both represented by a simple Cobb- Douglas production function without a technology component. Plant 1 has K1=1 and Plant 2 has K2=4 while w=$20 and v=$20. 1-Write both production functions and derive the respective MPL of each one. If the entrepreneur wishes to minimize Short-Run total cost: 2-How would labor and output be allocated between the two plants and why? 3-Derive the short-run Total Cost, Average Cost and Marginal Cost Functions.
An entrepreneur owns a factory with two plants that produce the same skateboards but differ in the amount of capital and Labor in them. They are both represented by a simple Cobb- Douglas production function without a technology component. Plant 1 has K1=1 and Plant 2 has K2=4 while w=$20 and v=$20. 1-Write both production functions and derive the respective MPL of each one. If the entrepreneur wishes to minimize Short-Run total cost: 2-How would labor and output be allocated between the two plants and why? 3-Derive the short-run Total Cost, Average Cost and Marginal Cost Functions.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter7: Production Economics
Section: Chapter Questions
Problem 9E
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An entrepreneur owns a factory with two plants that produce the same skateboards but differ
in the amount of capital and Labor in them. They are both represented by a simple Cobb-
Douglas production function without a technology component. Plant 1 has K1=1 and Plant 2
has K2=4 while w=$20 and v=$20.
1-Write both production functions and derive the respective MPL of each one.
If the entrepreneur wishes to minimize Short-Run total cost:
2-How would labor and output be allocated between the two plants and why?
3-Derive the short-run Total Cost, Average Cost and Marginal Cost Functions.
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