Given the linear production function: Log (Q) = 1.5 + 0.76 Log (L) + 0.24 Log (K) Where Q is the level of output, L is the units of labor and K is the units of capital employed. a. If one worker's wages are $30 per day, how many workers should the firm employ per unit of output? b. What is the percentage of the firm's revenue spent on labor?

Given the linear production function: Log (Q) = 1.5 + 0.76 Log (L) + 0.24 Log (K) Where Q is the level of output, L is the units of labor and K is the units of capital employed. a. If one worker's wages are $30 per day, how many workers should the firm employ per unit of output? b. What is the percentage of the firm's revenue spent on labor?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter16: The Markets For Labor, Capital, And Land

Section: Chapter Questions

Problem 6P

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Suppose that Zamboni Enterprises is the only company that sells zambonis (ice resurfacing machines). To produce the machines, the company hires assembly workers. Since these workers can work in many different companies, Zamboni Enterprises must pay them the market wage, which is equal to $6. The number of zambonis that the company produces, which is denoted by y, is proportional to the number of assembly workers that it hires, which are denoted by N; in particular, the production function is given by y=0.76N. The economywide demand for zambonis is given by the following demand function: y=2191-219p, where y is the number of zambonis that consumers are willing to purchase at price p. Given this market structure, how many assembly workers will Zamboni Enterprises choose to hire? How many zambonis will Zamboni Enterprises produce and sell? What will be the price of a zamboni? If the market for zambonis were competitive, how many zambonis would be produced? If the market for…
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