Question
1.Ben's National Tire Shop has the following daily production function: Q=300K+700L-0.25K^2-0.5L^2 Where L is the number of specialized mechanics and K is the number of
1.Ben's National Tire Shop has the following daily production function:
Q=300K+700L-0.25K^2-0.5L^2
Where L is the number of specialized mechanics and K is the number of car lifts used to repair and rotate tires.The cost of labor is $400/day and the cost of the capital is $100/day.
a.If Ben has a daily budget of $115,000 to spend on labor and capital, what is the output-maximizing combination of workers and lifts he should employ?
b.What is the daily level of production (Q) at the output-maximizing combination of inputs?
c.Draw a graph to show the intuition of the output-maximization process you just used.(Hint: you need 2 lines. Be sure to label which element is Fixed and which you are solving for.) Then explain what you've drawn. (Note: You DON'T NEED to label all numeric values)
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Horngrens Accounting
Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo Ann L. Johnston, Peter R. Norwood
10th Canadian edition Volume 1
978-0134213101, 134213106, 133855376, 978-0133855371
