You are a manager for Herman Miller, a major manufacturer of office furniture. You recently hired an economist to work with engineering and operations experts to estimate the production function for a particular line of office chairs. The report from these experts indicates that the relevant production function is Q = 2(K)/2(L)1/2 Marginal Product of Labor MPL= K1/2L1/2 where K represents capital equipment and Lis labor. Your company has already spent a total of $11,000 on the 5 units of capital equipment it owns. Due to current economic conditions, the company cannot increase capital and therefore capital (K) is fixed at 5 units. Workers at the firm are paid a competitive wage of $80 per day and chairs can be sold for $500 each. (a) What is the profit-maximizing level of labor usage (profit maximizing number of workers)? (b) What is the output when the profit maximizing number of workers are hired?

You are a manager for Herman Miller, a major manufacturer of office furniture. You recently hired an economist to work with engineering and operations experts to estimate the production function for a particular line of office chairs. The report from these experts indicates that the relevant production function is Q = 2(K)/2(L)1/2 Marginal Product of Labor MPL= K1/2L1/2 where K represents capital equipment and Lis labor. Your company has already spent a total of $11,000 on the 5 units of capital equipment it owns. Due to current economic conditions, the company cannot increase capital and therefore capital (K) is fixed at 5 units. Workers at the firm are paid a competitive wage of $80 per day and chairs can be sold for $500 each. (a) What is the profit-maximizing level of labor usage (profit maximizing number of workers)? (b) What is the output when the profit maximizing number of workers are hired?

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 7E

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Assume that you are a manager for Haworth —one of the major manufacturers of office furniture. You recently hired an economist to work with engineering and operations experts to estimate the production function for a particular line of office chairs. The report from these experts indicates that the relevant production function is Q = 2(K) 1/2 (L)1/2 where K represents capital equipment and L is labor. Hanworth has already spent a total of $10,000 on the 4 units of capital equipment it owns. Due to current economic conditions, the company does not have the flexibility needed to acquire additional equipment. The workers at the firm are paid a competitive wage of $100. Also, the chairs can be sold for $200 each. Given the competitive wage of workers which is $100 and the price of chairs, what is your profit-maximizing level of output and labor usage? what is your maximum profit?
Assume that you are a manager for Haworth —one of the major manufacturers of office furniture. You recently hired an economist to work with engineering and operations experts to estimate the production function for a particular line of office chairs. The report from these experts indicates that the relevant production function is Q = 2(K) 1/2 (L)1/2 where K represents capital equipment and L is labor. Hanworth has already spent a total of $10,000 on the 4 units of capital equipment it owns. Due to current economic conditions, the company does not have the flexibility needed to acquire additional equipment. The workers at the firm are paid a competitive wage of $100. Also, the chairs can be sold for $200 each. Suppose that Hanworth aims to produce 200 units of chair, how much is the optimal level of capital(K) needed in the production to maximize your profit?
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You are a manager of a major manufacturer of office furniture. You recently hired an economist to work with engineering and operations experts to estimate the production function for a particular line of office chairs. The report from these experts indicates that the relevant production function is Q = 2(K) 1/2 (L)1/2 where K represents capital equipment and L is labor. Your company has already spent a total of P8,000 on the 9 units of capital equipment it owns. Due to current economic conditions, the company does not have the flexibility needed to acquire additional equipment. If workers at the firm are paid a competitive wage of P120 per day and chairs can be sold for P400 each, what is your profit-maximizing level of output and labor usage? What is your maximum profit?