You are processing tax returns for clients using P permanent workers and 7 temporary workers as...

 

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You are processing tax returns for clients using P permanent workers and 7 temporary workers as your inputs according to the Cobb-Douglas production function q(P,T) = 3p0.670.4. You pay your permanent workers w per unit and your temporary workers r per unit. Show your work at each step of this problem. (a) If you are in equilibrium and you have twice as many temporary workers as permanent workers, what is the ratio of per unit pay (wton) for the two groups? (Hint: since your are in equilibrium, the tangency condition - or, equivalently, the last dollar rule) must hold.) (b) What proportion of your total payroll Mgoes to each group? (Hint: the proportions are represented by WP and rT, each divided by M.) You are processing tax returns for clients using P permanent workers and 7 temporary workers as your inputs according to the Cobb-Douglas production function q(P,T) = 3p0.670.4. You pay your permanent workers w per unit and your temporary workers r per unit. Show your work at each step of this problem. (a) If you are in equilibrium and you have twice as many temporary workers as permanent workers, what is the ratio of per unit pay (wton) for the two groups? (Hint: since your are in equilibrium, the tangency condition - or, equivalently, the last dollar rule) must hold.) (b) What proportion of your total payroll Mgoes to each group? (Hint: the proportions are represented by WP and rT, each divided by M.)

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To solve this problem we will first set up the production function and the cost function to derive t... View the full answer