The Director of ABC Enterprise hires labour (L) and rents capital equipment (K) in a competitive market to produce mango juice. At the moment, the wage rate of labour is GH¢2 per hour and capital is rented at GH¢5 per hour. Also, the unit price of mango juice is GH¢0.75 and total cost of production is GH¢1,000. Suppose the firm’s production function (Q) follows a Cobb-Douglas specification given as: 0.5 0.5 ?=14? ? +10 Determine the optimal input usage and the maximum profit that ABC Enterprise would obtain at the optimal input levels
The Director of ABC Enterprise hires labour (L) and rents capital equipment (K) in a competitive market to produce mango juice. At the moment, the wage rate of labour is GH¢2 per hour and capital is rented at GH¢5 per hour. Also, the unit price of mango juice is GH¢0.75 and total cost of production is GH¢1,000. Suppose the firm’s production function (Q) follows a Cobb-Douglas specification given as: 0.5 0.5 ?=14? ? +10 Determine the optimal input usage and the maximum profit that ABC Enterprise would obtain at the optimal input levels
Chapter11: Profit Maximization
Section: Chapter Questions
Problem 11.4P
Related questions
Question
The Director of ABC Enterprise hires labour (L) and rents capital equipment (K) in a competitive market to produce mango juice. At the moment, the wage rate of labour is GH¢2 per hour and capital is rented at GH¢5 per hour. Also, the unit price of mango juice is GH¢0.75 and total cost of production is GH¢1,000.
Suppose the firm’s production function (Q) follows a Cobb-Douglas specification given as: 0.5 0.5 ?=14? ? +10
Determine the optimal input usage and the maximum profit that ABC Enterprise would obtain at the optimal input levels.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you