Woodmaster uses labour (L) and capital (K) to produce furniture (Q). Woodmaster's production function is given...

  

Transcribed Image Text:

Woodmaster uses labour (L) and capital (K) to produce furniture (Q). Woodmaster's production function is given by Q = L + K ³, where L20, K≥ 0, Q≥ 0. (i) One of the following (L, K) bundles is NOT on the same isoquant as others: (0,36), (3,9), (5,2), (6,0). In that bundle, amount of labour (L) is and amount of capital (K) is Please use up to two decimal points (if necessary) for parts (ii) - (v) below. Answers to all questions are free of units (i.e., all answers are in terms of numbers). (ii) Suppose Woodmaster uses 9 units of labour and 4 units of capital. At that point, i.e. (L, K) = (9,4), marginal product of labour (MP) is and marginal product of capital (MPK) is Let w and rº denote the price of labour and price of capital respectively. Suppose r = 9, w 36, and Woodmaster's production target is Q = 2. (iii) To minimise cost at given prices for inputs, Woodmaster chooses K and L= (iv) Minimum cost to produce = 2 is Due to economic downturn, demand for Woodmaster's product has halved. Now, Woodmaster's production target is Q0.5 × 2 (v) To minimise cost, Woodmaster would choose K = and L= (vi) Minimum cost to produce Q = 0.5 x 2 is (vii) A new owner has taken over Woodmaster and renamed it Masterwood. The new motto at Masterwood is to maximise output. If Masterwood faces the same input prices as Woodmaster and can spend at most 80 on two inputs, the maximum possible output Masterwood can produce is Woodmaster uses labour (L) and capital (K) to produce furniture (Q). Woodmaster's production function is given by Q = L + K ³, where L20, K≥ 0, Q≥ 0. (i) One of the following (L, K) bundles is NOT on the same isoquant as others: (0,36), (3,9), (5,2), (6,0). In that bundle, amount of labour (L) is and amount of capital (K) is Please use up to two decimal points (if necessary) for parts (ii) - (v) below. Answers to all questions are free of units (i.e., all answers are in terms of numbers). (ii) Suppose Woodmaster uses 9 units of labour and 4 units of capital. At that point, i.e. (L, K) = (9,4), marginal product of labour (MP) is and marginal product of capital (MPK) is Let w and rº denote the price of labour and price of capital respectively. Suppose r = 9, w 36, and Woodmaster's production target is Q = 2. (iii) To minimise cost at given prices for inputs, Woodmaster chooses K and L= (iv) Minimum cost to produce = 2 is Due to economic downturn, demand for Woodmaster's product has halved. Now, Woodmaster's production target is Q0.5 × 2 (v) To minimise cost, Woodmaster would choose K = and L= (vi) Minimum cost to produce Q = 0.5 x 2 is (vii) A new owner has taken over Woodmaster and renamed it Masterwood. The new motto at Masterwood is to maximise output. If Masterwood faces the same input prices as Woodmaster and can spend at most 80 on two inputs, the maximum possible output Masterwood can produce is

Answer rating: 100% (QA)

This problem can be solved by analyzing the given production function and using the concepts of isoquants marginal product and cost minimization 1 We need to find the bundle L K that is not on the sam... View the full answer