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Suppose that labor (worker hours) and capital (machine hours) are perfect substitutes in the production of...

Suppose that labor (worker hours) and capital (machine hours) are perfect substitutes in the production of widgets. Each widget can be produced in 20 minutes by a worker or in 15 minutes by a machine. The price of labor is $20 per hour, and the price of capital is $30 per hour. Derive the equation for long-run total cost.

a. ???? = 60?

b. ???? = 170? / 12

c. ???? = 120?

d. ???? = 20? / 3

e. ???? = 30? / 4

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Answer #1

Production function 8 = 3L +4K MPL = 3 MP = 4 (Since Capital is more efficient 15:20 3:4 MIK 2 3L + 470 20 corner solution, U

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