Davy Metal Company produces brass fittings. Davy's engineers
estimate the production function represented below as relevant for
their long-run capital-labor decisions.
Q = 500L0.6K0.8,
where Q = annual output measured in pounds,
L = labor measured in person hours,
K = capital measured in machine hours.
The marginal products of labor and capital are:
MPL = 300L-0.4K0.8 MPK
= 400L0.6K-0.2
Davy's employees are relatively highly skilled and earn $15 per
hour. The firm estimates a rental charge of $50 per hour on
capital. Davy forecasts annual costs of $500,000 per year, measured
in real dollars.
a. Determine the firm's optimal capital-labor ratio, given the
information above. K =?? *L (please keep one
decimal place)
b. Davy is currently negotiating with a newly organized union. The
firm's personnel manager indicates that the wage may rise to $22.50
under the proposed union contract. Analyze the effect of the higher
union wage on the optimal capital-labor ratio and the firm's
employment of capital and labor. The new optimal ratio is:
K =??? *L (please keep one decimal
place). Davy should use ???? labor hours under the
new wages. (please enter "less" or "more"
Davy Metal Company produces brass fittings. Davy's engineers estimate the production function represented below as relevant...
6) Davy Metal Company produces brass fittings. Davy's engineers estimate the production function represented below as relevant for their long-run capital-labor decisions. Q = 500L0.6 0.8 where Q- annual output measured in pounds, L-labor measured in person hours, K=capital measured in machine hours. Davy's employees are relatively highly skilled and earn $15 per hour. The firm estimates a rental charge of $50 per hour on capital. Davy forecasts annual costs of $500,000 per year, measured in real dollars. a. Write...
4. Davy Metal Company produces brass fitings. Davy's engineers estimate the production function represented below as relevant for their long-run capital-labor decisions. 500L0.6K0.8, where Q- annual output measured in pounds, L - labor measured in person hours, K -capital measured in machine hours. The marginal products of labor and capital are therefore MPL-300L-0.4K0.8 MPK-400L0.6K-0.2 Davy's employees are relatively highly skilled, so labour costs 15 per hour. The firm estimates a rental charge of є50 per hour on capital. Davy forecasts...
Please explain in details with step-by-step solution, Thank you so much c) Davy metal company produces brass fittings. Davy's engineers estimate the production function represented below as relevant for their long run capital-labor decisions. where O-annual output measured in kilograms L- labor measured in person hours Kcapital measured in machine hours Davy's employees are relatively highly skilled and earn S15 per hour. The firm estimates a rental charge of $50 per hour on capital. Davy forecasts annual costs of S500,000...
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