Question

You are a manager for Herman Miller, a major manufacturer of office furniture. You recently hired an economist to work with engineering and operations experts to estimate the production function for a particular line of office chairs. The report from these experts indicates that the relevant production function is
Q = 2(K) 1/ 2 (L) 1/ 2
where K represents capital equipment and L is labor. Your company has already spent a total of $ 8,000 on the 9 units of capital equipment it owns. Due to cur-rent economic conditions, the company does not have the flexibility needed to acquire additional equipment. If workers at the firm are paid a competitive wage of $ 120 per day and chairs can be sold for $ 400 each, what is your profit-maximizing level of output and labor usage? What is your maximum profit?



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  • CreatedApril 18, 2014
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