1)

Jasmine has just inherited a restaurant from her beloved grandfather. Even though grieving, she

faces some problems she has to solve. In the short run, she has to stick with the current kitchen

and location (i.e. 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

.75

0.5

= (?, ?) = ?

?

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)

In the long run, how many additional (small) units of capital would be needed instead of the

additional labor?

C)

Due to flooding, 64 (small) units of kitchen machinery (i.e. capital) are not working. How many

more (small) units of labor does Jasmine need to produce the same output?

D)

The floods are over, but some employees are sick. If Jasmine wanted to keep output constant,

how many additional (small) units of capital would she need to cover for the loss of 81 (small)

units of labour?