Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Question
Chapter 5, Problem 13PAA
To determine
To find: The profit maximizing output, labor and maximum profit.
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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)1/2(L)1/2 where K represents capital equipment and L is labor. Your company has already spent a total of $8,000 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 $120 per day and chairs can be sold for $400 each, what is your profit-maximizing level of output and labor usage? What is your maximum profit?
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?
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?
Chapter 5 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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