Suppose that widgets can be produced using two different production techniques, A and B. The following table provides the total input requirements for each of five different total output levels.
Suppose that widgets can be produced using two different production techniques, A and B. The following table provides the total input requirements for each of five different total output levels.
Chapter7: Production And Cost In The Firm
Section: Chapter Questions
Problem 3.7P
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Transcribed Image Text:Suppose that widgets can be produced using two different production techniques, A and B. The following
table provides the total input requirements for each of five different total output levels.
Q = 1
Tech. K L
A
4 1
B
1 3
Total
Cost
Q = 2
K L
2
5
6
2
Q=1
$6
L
K
Q = 3
Assuming that the price of labor (PL) is $2 and the price of capital (PK) is $1, calculate the total cost of
production for each of the five levels of output using the optimal (least-cost) technology at each level.
K
9
4
Q = 4
L
K L
4
12
7
11 8
8 5 12 7 15
To do this, complete the table below by calculating the total cost of production, filling in the missing
values using the optimal (least-cost) technology at each level. (Enter your responses as whole numbers.)
Q = 5
$27
Q=2
$ 10
Q = 5
K L
Q = 3
$ 17
Q = 4
$ 26
How many labor hours (units of labor) would be employed at each level of output? How many machine
hours (units of capital)?
To answer this, complete the table below for the units of labor and units of capital that would be used to
produce each level of output. (Enter your responses as whole numbers.)
Q=1 Q = 2
Q = 3
Q = 4
Q = 5
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