Question
You own a small business that repairs furnaces and air conditioners. The market is competitive so youmust charge the same price as all other firms
You own a small business that repairs furnaces and air conditioners. The market is competitive so youmust charge the same price as all other firms - $50 per house visit. You can take on as many customersas you would like when you charge this price. Your daily production function is given below, where K = the number of vans you have and L = thenumber of employees you have each day:
Q = F(K,L) = 10K2L1/2 (round down if you find a fractional unit of Q. For example, if you pick K and L such that Q=3.12 thenround down to Q=3 in this case) You currently lease 2 vans and cannot change this in the short run. The daily wage for one of yourworkers is w=$250, and since there is a competitive market for labor you cannot change this either. The daily rental rate on one van is r=$100.
How many employees should you hire? (Please show and explain the math used)
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