Question
How do I set this up in an excel spreadsheet? 2) Suppose that you have estimated the following output function where L is labor and
How do I set this up in an excel spreadsheet?
2) Suppose that you have estimated the following output function where L is labor and K is capital:
Y = 2K1/3L1/2
(23 Points)
You know that the current price of labor is $10 and capital cost is $1 per per machine (capital).
You currently use 27 units (machines) of capital.The price of the output is $40
As we compete both internationally and within markets, the challenge of wages and technology create a balancing act relative to the capital/labor ratio. In addition, rising interest rates increase the cost of capital, both explicit and implicit. Note that this material is covered in Chapter 5.FINALLYPLEASE USE A ROUND NUMBER FOR EMPLOYEES (IT MAKES IT SOMEWHAT CLEARER)
You can either do this using calculus or an excel spreadsheetboth work. If you use calculus, show your work; if you use a spreadsheet, please submit the spreadsheet. Note that number of employees may include fractions (part time workers and product in millions)
- Given a fixed level of capital (K=27), and a price of $40 per unit of output (output is represented by Y), how many employees (L) will you hire to maximize profit?This requires a calculation. (5 Points)
- Given a fixed level of capital (K=27), and a price of $40 per unit of output, what is the level of output you will produce? This requires a calculation. (5 Points)
- Calculate the profit given the optimal number of employee given the answer in #2a. (4 Points)
- At What number of employees would you maximize output but not lose money? This requires a calculation. (4 Points)
- If the Wage Rate Rose to $12.50, what would be the possible outcomes to L, P, and Profit? This requires a calculation (5 Points)
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