Your firm must choose between two options:

Option 1: Hiring business undergrads at an hourly rate of $15. The production function with undergrads is given by:

Option 2: Hiring employees with high school education at an hourly rate of $8 and incurring a fixed training cost of $25,000 for the entire staff. The production function for employees with a high school education is given by:

The market price for your output is fixed at $10. You care only about the one-year profit. a) Calculate the profit maximizing use of labor for Option 1. Calculate the firms profits. b) Calculate the profit maximizing use of labor for Option 2. Calculate the firms profits. c) Which of the two options will you choose? Explain.

f(Lu)=45Lu2/3 f(Lh)=160Lh1/2 f(Lu)=45Lu2/3 f(Lh)=160Lh1/2