PROBLEM #3 An auto parts manufacturer uses a production process for one of its parts that has a long- run production function as follows: q=20K²L, where L measures the number of labor hours and K measures the number of rental hours for the machine used in the production process. The machine can be rented for $90 per hour; the hourly wage for workers is $15. The manufacturer has a production budget of $23,220 for this type of part. If the manufacturer's goal is to maximize output, subject to the production budget, find the output-maximizing levels of capital and labor the manufacturer will choose.
PROBLEM #3 An auto parts manufacturer uses a production process for one of its parts that has a long- run production function as follows: q=20K²L, where L measures the number of labor hours and K measures the number of rental hours for the machine used in the production process. The machine can be rented for $90 per hour; the hourly wage for workers is $15. The manufacturer has a production budget of $23,220 for this type of part. If the manufacturer's goal is to maximize output, subject to the production budget, find the output-maximizing levels of capital and labor the manufacturer will choose.
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter7: Economies Of Scale And Scope
Section: Chapter Questions
Problem 8MC
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