2. (Short-run costs, Evren wants to go into the donut business. For $500 per month he can rent abakery complete with all the equipment he needs to make a dozen different kinds of donuts (K=1, r=500). He must pay unionized donut bakers a monthly salary of $400 each. He projects his monthlyproduction function to beQ = 5KLwhere Q is tons of donuts.a. With the current level of capital, what is the marginal product of labor? Is the marginal productdiminishing? Explain.b. If Evren, wishes to make 25 tons of donuts, how many bakers are required given the current level ofcapital? How much will it cost to produce this (total cost)?c. Derive Evren's short-run cost function with K = 1.d. Derive the marginal cost curve from your answer to c. and show the relationship between the marginalcost and marginal product of labor.

Given information Production function: Q = 5KL Where Q is tons of donuts K is capital L is labor…

2. (Short-run costs, Evren wants to go into the donut business. For $500 per month he can rent a bakery complete with all the equipment he needs to make a dozen different kinds of donuts (K=1, r= 500). He must pay unionized donut bakers a monthly salary of $400 each. He projects his monthly production function to be

2. (Short-run costs, Evren wants to go into the donut business. For $500 per month he can rent a bakery complete with all the equipment he needs to make a dozen different kinds of donuts (K=1, r= 500). He must pay unionized donut bakers a monthly salary of $400 each. He projects his monthly production function to be

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 15P

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