Miguel and Jake run a paper company. Each week they need to produce 1,000 reams of paper to ship to their customers. The paper plant's long-run production function is: q= 4K%L% where q is the number of reams produced, K is the quantity of capital rented, and L is the quantity of labor hired. K and MP = 3 L For this production, MP, K The weekly cost function for the paper plant is C= 10K+2L where C is the total weekly cost %3D What ratio of capital to labor minimizes Miguel and Jake's total costs? (Hint: Find the Marginal Rate of Technical Substitution (MRTS) for capital and labor.)
Miguel and Jake run a paper company. Each week they need to produce 1,000 reams of paper to ship to their customers. The paper plant's long-run production function is: q= 4K%L% where q is the number of reams produced, K is the quantity of capital rented, and L is the quantity of labor hired. K and MP = 3 L For this production, MP, K The weekly cost function for the paper plant is C= 10K+2L where C is the total weekly cost %3D What ratio of capital to labor minimizes Miguel and Jake's total costs? (Hint: Find the Marginal Rate of Technical Substitution (MRTS) for capital and labor.)
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.1P
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