can you please show the working out for the second part that starta with " How much labour and capital would they need to employ if the price oflabour per hour is £9 and the price of capital is £36 per hour? What isthe total cost of production?"
can you please show the working out for the second part that starta with " How much labour and capital would they need to employ if the price oflabour per hour is £9 and the price of capital is £36 per hour? What isthe total cost of production?"
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.7P
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can you please show the working out for the second part that starta with " How much labour and capital would they need to employ if the
Transcribed Image Text:How much labour and capital would they need to employ if the price of
labour per hour is £9 and the price of capital is £36 per hour? What is
the total cost of production?
Pomme have the opportunity to move their production overseas where
the price of labour per hour is £5, but the price of capital is £45 per
hour. Moving production will cost £1100000. Should Pomme transfer
production overseas?
(c) Pomme invent a new production technique. Give an example and proof of a
production function that represent technological progress above that in (a)? Is
your example labour saving, capital saving or neutral?
Transcribed Image Text:Pomme manufacture Wifidgets. They use both labour, L, and capital, K, in their
production of Wifidgets. Both L and K are measured in hours. The production
method they use requires that at least one labour and one capital is always
employed.
(a) Pomme have a Cobb-Douglas technology which means that their production
function is: Q(L, K) = (LK) 0.5. The production method requires that at least
one labour and one capital is always employed.
Find the marginal product of labour and marginal product of capital.
How does production change as Pomme employ more labour? How
does production change as Pomme employ more capital? Sketch the
production function with regard to labour and with regard to capital.
Compute the marginal technical rate of substitution. Sketch the
isoquants.
(b) Pomme are making plans for next year where they plan to sell 180000
Wifidgets.
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