1. (Production) Jasmine has just inherited a restaurant. In the short run, she has to stick with the current kitchen and location (i.c. capital is fixed), but she can hire and fire as many workers as she likes, as there are no contracts in her industry (i.e. labor is variable). In the long run, she can also change kitchen and location. She currently has 16 units of capital and 9 units of labor. She produces output (meals) according to the function q = f(L,K)= L0.5K0.75 a. In the short run, if Jasmine needs to produce 36 additional meals (or rather small fractions thereof), how many additional (small) units of labor does she need? b. How much output does a worker (unit of labor) produce on average? If you hired an additional worker, would the average output per worker increase or decrease? c. In the long run, if Jasmine determines to increase capital input only instead of additional labor to produce 36 additional meals, how many additional (small) units of capital would be needed?

1. (Production) Jasmine has just inherited a restaurant. In the short run, she has to stick with the current kitchen and location (i.c. capital is fixed), but she can hire and fire as many workers as she likes, as there are no contracts in her industry (i.e. labor is variable). In the long run, she can also change kitchen and location. She currently has 16 units of capital and 9 units of labor. She produces output (meals) according to the function q = f(L,K)= L0.5K0.75 a. In the short run, if Jasmine needs to produce 36 additional meals (or rather small fractions thereof), how many additional (small) units of labor does she need? b. How much output does a worker (unit of labor) produce on average? If you hired an additional worker, would the average output per worker increase or decrease? c. In the long run, if Jasmine determines to increase capital input only instead of additional labor to produce 36 additional meals, how many additional (small) units of capital would be needed?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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