Question
Suppose that you have estimated the following output function where L is labor and K is capital: Y = 2K 1/4 L 1/2 You know
Suppose that you have estimated the following output function where L is labor and K is capital:
Y = 2K1/4L1/2
You know that the current price of labor is $10 and capital cost is $5 per per machine (capital).
You currently use 81 units of capital.
For #2a, the Output (Y) is 100
a)How many employees (L) do you need to hire to achieve your output goal?
b)Given a fixed level of capital (K=81), and a price of $100 per unit of output, what is the optimal number of employees?
c)Calculate the profit given the optimal number of employee given the answer in #3b
d)At What number of employees would you maximize output but not lose money
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