Q =min{ 98 L , 126 K} where Q is the output of lampposts. The prices...
Q =min{ 98 L , 126 K}
where Q is the output of lampposts.
The prices of labor (PL), capital (PK), lamppost (P) and the cost (C) are the following:
PL=11, PK=5, P=11 and
C=5,137
What is the profit maximizing amount of labor that Meyer Inc should
hire?
Homework Answers
PL=11, PK=5, P=11 and C=5,137
Cost function: C = L * PL + K * PK
=> 5137 = 11L + 5K
--------
Q =min{ 98 L , 126 K}
K and L are complementary inputs.
At profit maximizing point in this case; Q = 98L = 126K
=> 98L = 126K
=> K = (98L / 126) ----------- (1)
Put (1) in cost function.
=> 5137 = 11L + 5K
=> 5137 = 11L + 5 (98L / 126)
=> (5137 * 196) = (11L * 126) + 490L
=> 1006852 = 1386L + 490L
=> 1006852 = 1876L
=> L = (1006852 / 1876)
=> L = 536.70
Profit maximizing amount of labor that firm should hire is 536.70
Add Answer to:
Q =min{ 98 L , 126 K}
where Q is the output of lampposts.
The prices...
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