Problem PS4.2.1

Anovatech provides cloud computing services to other businesses. It uses programmers (labor) and servers (capital) to produce its services. It costs Anovatech $6,000 a month to hire a programmer, and $200 a month to rent a server. (For simplicity, assume all inputs are continuously divisible.) Today, Anovatech has 64 servers in their datacenters.

Anovatech can use servers to provide more service, or they can hire programmers to think of ways to run those servers more efficiently. Anovatech's production function is proportional to the sum of the square roots of the number of programmers they employ and the number of servers they rent, so assume thatq=K+Lfor some unit of output service.

In the short run, if Anovatech has a monthly budget of $200,000, what is the highest production they can achieve?

incorrect

Problem PS4.2.2

Anovatech thinks they have an opportunity to win a contract for 30 units a month of cloud computing service.

In the short run, what is the lowest cost at which Anovatech would be able to produce 30 units a month of service?

(This cost may exceed their budget.)

correct

2916800

Problem PS4.2.3

Anovatech management thinks that cost is a bit steep in the short run, but maybe in the long run they can bring the cost down.

In the long run, what is the lowest cost at which Anovatech would be able to produce 30 units a month of service?

incorrect

11425.59

How many programmers and servers would they employ?

L=incorrect

0.94

K=correct

842.87

What percent cost savings does this represent, relative to the short term?

(Enter a positive number. You can enter an answer without the percent sign, like "0.4325", or with it, like "43.25%", butnotlike "43.25".)

incorrect

0.9961

Submit

Problem PS4.2.4

What is Anovatech's long-run cost curve?

C(q)=6000/31 q

C(q)=6000/31q2

C(q)=6000/31

C(q)=6000/31q

C(q)=6000/31 q2

incorrect

Problem PS4.2.5

What happens to Anovatech's long-run average cost as quanity produced increases?

It remains the same

The answer cannot be determined from given information

It decreases slowly

It decreases rapidly

It increases