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You are an entrepreneur interested in opening a coffee shop. You determine that the production function for coffee is Q = f(KL) = 2L12K1/2. The
You are an entrepreneur interested in opening a coffee shop. You determine that the production function for coffee is Q = f(KL) = 2L12K1/2. The quality of machines used in your production would affect the quality of your coffee produced. High quality machines would result in a capital price of $2500, while low quality machines at $1250. However, you would be able to sell your coffee for $6 with high quality machines and only $3 with low quality machines. For the price of labour, you would be setting it at $15. If your student ID is below 3000000, then use high quality to complete the question. If your student ID is above 3000000, then use low quality to complete the question. a) What would be your coffee shop's MRTS? b) What would be the labour to capital ratio? c) How many units of labour and capital should you employ to minimize cost if you plan to sell 2000 units of coffee? d) What would be your total cost of producing 2000 units of coffee? e) How much profit or loss would you be making at 2000 units of coffee
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