a) At what level of Q is ATC minimized? What are the values of ATC and of MC at this level of output?

b) If K is increased to a fixed 16 units, at what level of Q is ATC minimized, and what are the values of ATC and ofMC at this level of output?

c)In the long run, with all inputs variable, what is the optimal K/L ration with input prices unchanged? How many units of L and of K would be required to produce the levels of output in 1c and in 1d and what is the average cost of producing Sonoblasts in each case? Explain the relation between your results here and those for 1a and 1b?

Transcribed Image Text:

Soundscape Enterprises manufactures Sonoblast, a device that produces a high-pitched reminder to telemarketers that they have once again disturbed you just when you were sitting down to dinner. The production function for Sonoblasts is given by the formula Q = 2KL/2 where Q is in units of output per period, K is in machine-weeks per period, and L is in labour- weeks per period. The machine rental rate r is $512 per machine-week and the wage rate w is $128 per labour-week. In the short run, K is fixed at 4 machine-weeks per period. Soundscape Enterprises manufactures Sonoblast, a device that produces a high-pitched reminder to telemarketers that they have once again disturbed you just when you were sitting down to dinner. The production function for Sonoblasts is given by the formula Q = 2KL/2 where Q is in units of output per period, K is in machine-weeks per period, and L is in labour- weeks per period. The machine rental rate r is $512 per machine-week and the wage rate w is $128 per labour-week. In the short run, K is fixed at 4 machine-weeks per period.

Answer rating: 100% (QA)

3 2K LYz 2 4L2 Y S12 128 64 C o K 0 TC ... View the full answer