Polyoak Containers produces milk cartons that are sold to dairy distributors. Polyoak has estimated this production function for its milk carton division: Q = 20L0.6K0.4, where Q = output measured in one thousand carton lots, L = labour measured in person hours, and K = capital measured in machine hours. Polyoak currently pays a wage of R10 per hour and considers the relevant rental price for capital to be R25 per hour. Determine the optimal capital-labour ratio that Polyoak should use in the milk carton division.
Polyoak Containers produces milk cartons that are sold to dairy distributors. Polyoak has estimated this production function for its milk carton division: Q = 20L0.6K0.4, where Q = output measured in one thousand carton lots, L = labour measured in person hours, and K = capital measured in machine hours. Polyoak currently pays a wage of R10 per hour and considers the relevant rental price for capital to be R25 per hour. Determine the optimal capital-labour ratio that Polyoak should use in the milk carton division.
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 6E
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Polyoak Containers produces milk cartons that are sold to dairy distributors. Polyoak has estimated this production function for its milk carton division:
Q = 20L0.6K0.4,
where Q = output measured in one thousand carton lots, L = labour measured in person hours, and K = capital measured in machine hours. Polyoak currently pays a wage of R10 per hour and considers the relevant rental
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