Murray Manufacturing Company produces masonry bricks. The firm's production function is given

as: Q = 5LK, where Q = Number of bricks, L = labor measured in person hours, and

in machine hours. Murray's labor cost, including fringe benefits, is $20 per hour, while the firm uses $80

per hour as an implicit machine rental charge per hour. Murray's current budget is $64,000 per month to

pay labor and capital.

a. Given the information above, determine Murray's optimal capital/labor ratio.

b. Determine the optimal quantities of labor and capital that will allow the firm to maximize output

given their budgeted input expenditure. What is the firm's optimal output?

c. If you were asked to find the quantities of labor and capital that minimizes the total cost /

expenditure of producing the same number of bricks as your answer to part b), what do you expect the

minimum expenditure to be? [IT IS NOT NECESSARY TO CALCULATE / DERIVE THE ALGEBRAIC

SOLUTION. BUT PROVIDE A THEORETICAL JUSTIFICATION].

3.