Question

3 More Production - 2 points Heather's Headscarfs is the premier headscarf haberdasher in the upper midwest. Heather's produces head- scarf's using the production technology: y = 1,000 KL with K measuring the number of sewing machine-hours used and I measuring the number of hours the tailor/seamstress spends making they headscarfs Heather sells each year. The people sewing the headscarfs are paid $10 per hour, and the average cost of capital per sewing machine-hour is $20. (a) What are the returns to scale for this production technology? Prove your answer analytically. (b) What is Heather's marginal product of capital when using this production technology? (e) What is Heather's marginal product of labor when using this production technology? (d) If Heather is locked in to a year long contract with her sewing machine provider to lease (rent) 1,000 sewing machine-hours, what is her short-run cost function over that time period? (e) If Heather is locked in to a year long contract with her sewing machine provider to lease (rent) 1,000 wwing machine-hours, what is her short-run marginal cost function over that time period? (f) At what quantity does Heather attain her minimum efficient scale of production while locked in to the capital leasing agreement?

Answer 1

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