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Tianyu owns a fried chicken restaurant in downtown Berkeley. The restaurant needs employees (L) for operation and raw meat preprocessing and fryers (K) for cooking.
Tianyu owns a fried chicken restaurant in downtown Berkeley. The restaurant needs employees (L) for operation and raw meat preprocessing and fryers (K) for cooking. The production function of drumsticks 1 2 2 1 is Q = 30KL5 with MPK = 20 (if and MPL = 10 (i) 3 where Q denotes the number of fried drumsticks per hour. Tianyu pays his employees $25 per hour and $50 per hour to rent the fryers. Using Tianyu's marketing and economic instinct, he determines that it is best for him to produce 300 drumsticks per hour and charge $5 per drumstick. A. [10 points) Are employees and fryers perfect input substitutes 0r complements for the bus tour technology? Explain your answer briey. Employees and fryers are: A. Perfect substitutes B. Perfect C. Neither D. Indeterminate complements Your explanation here. B. [5 points) Does the drumstick production exhibit increasing, decreasing, or constant returns to scale? Explain your answer briey. Production exhibits: A. Increasing B. Decreasing C. Constant D. Neither E. Indeterminate returns to scale returns to scale returns to scale Your explanation here. C. (20 points] How many fryers and employees should Tianyu rent and hire, respectively? What is the corresponding optimal total cost to produce 300 drumsticks per hour? Show your cost minimization calculation carefully. Illustrate the optimal input mix with the corresponding isoquant and isocost curves in a graph. Clearly label the axes and intercepts in your graph. Optimal fryers K* Optimal employees L* Optimal total cost TC * Your calculation and graph here. D. (15 points] What is the marginal cost of fried drumsticks? Explain your answer carefully. Marginal cost is dollars. Your calculation and explanation here
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