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Hannah and Sam run Moretown Makeovers, a home remodeling business. The number of square feet they can remodel in a week is described by the
Hannah and Sam run Moretown Makeovers, a home remodeling business. The number of square feet they can remodel in a week is described by the Cobb-Douglas production function
Q=F(L,K)
Q=F(L,K)
Q=10L
0.5
K
0.5
,
Q=10L0.5K0.5,
whereLis their number of workers andKis units of capital. The wage rate is $3,200 per week and a unit of capital costs $200 per week. Suppose that when initially producing 100 square feet a week, they use 40 units of capital.
a. What is their short-run cost of remodeling 400 square feet per week?
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