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You have a small business that uses machines (K) and labour (L) to produce output (Q). You need two workers for every machine, so your
You have a small business that uses machines (K) and labour (L) to produce output (Q). You need two workers for every machine, so your production function is Q = min{L, 2K}. You have to pay w = 25 for every unit of labour and r = 400 for every machine. You need to produce 6,000 units of output Q. (a) Write down the long-run "producer's problem" [define the objective, any constraints and what is being chosen to achieve the objective.] (b) What quantities of Labour and Captial are demanded? (c) What is your minimized total cost?
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