The Southern Mail produces local newspapers. The company can rent its equipment and hire workers at competitive rates. Equipment needed for this operation can be rented at R4 per hour, and labour can be hired at R3 per worker hour. The production function using available technology can be expressed as: Q = 2L0.5 K0.5 a) Determine the firm's optimal ratio of labour to capital. b) Determine the cost-minimizing level of capital and labour in the long run if the firm wants to produce 160 units. Calculate the cost. c) Graphically illustrate this using isoquant and isocost lines
The Southern Mail produces local newspapers. The company can rent its equipment and hire workers at competitive rates. Equipment needed for this operation can be rented at R4 per hour, and labour can be hired at R3 per worker hour. The production function using available technology can be expressed as: Q = 2L0.5 K0.5 a) Determine the firm's optimal ratio of labour to capital. b) Determine the cost-minimizing level of capital and labour in the long run if the firm wants to produce 160 units. Calculate the cost. c) Graphically illustrate this using isoquant and isocost lines
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.1P
Related questions
Question
The Southern Mail produces local newspapers. The company can rent its equipment and
hire workers at competitive rates. Equipment needed for this operation can be rented at R4
per hour, and labour can be hired at R3 per worker hour. The production function using
available technology can be expressed as: Q = 2L0.5 K0.5
a) Determine the firm's optimal ratio of labour to capital.
b) Determine the cost-minimizing level of capital and labour in the long run if the
firm wants to produce 160 units. Calculate the cost.
c) Graphically illustrate this using isoquant and isocost lines.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 1 images
Recommended textbooks for you
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning