Question
Please explain the concept of how to solve part d . Thank you A firm plans to produce 500 units per day of good Z
Please explain the concept of how to solve part d. Thank you
A firm plans to produce 500 units per day of good Z. The firm's production engineer finds two technically efficient processes (i.e., input combinations of labor and capital) to produce 500 units per day:
Process Alpha:
Labor= 625,
Capital=45
Process Beta:
Labor =250
Capital= 125
a.If the production function for the existing technology is , where Q is the maximum possible output, L is the amount of labor used, and K is the amount of capital used, then f (625, 45) = 500 and f (250, 125) = 500.
The answer is stated in the asked question itself that two technically efficient processes will produce 500 units per day with the combination of given labor and capital.
b. If the firm must pay $350 per day for a unit of labor and $1,500 per day for a unit of capital, which process is economically efficient, Alpha or Beta?
= 286,250 TC of Process Alpha
= 262,500 TC of Process Beta
d.Holding the price of capital constant at $1,500 per unit, Process Alpha will never be economically efficient if a unit of labor costs ? (less, more) than $ ? per day.
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