An entrepreneur owns a factory with two plants that produce the same skateboards but differ in the amount of capital and Labor in them. They are both represented by a simple Cobb- Douglas production function without a technology component. Plant 1 has K1=1 and Plant 2 has K2=4 while w=$20 and v=$20. 1-Write both production functions and derive the respective MPL of each one. If the entrepreneur wishes to minimize Short-Run total cost: 2-How would labor and output be allocated between the two plants and why? 3-Derive the short-run Total Cost, Average Cost and Marginal Cost Functions.

An entrepreneur owns a factory with two plants that produce the same skateboards but differ in the amount of capital and Labor in them. They are both represented by a simple Cobb- Douglas production function without a technology component. Plant 1 has K1=1 and Plant 2 has K2=4 while w=$20 and v=$20. 1-Write both production functions and derive the respective MPL of each one. If the entrepreneur wishes to minimize Short-Run total cost: 2-How would labor and output be allocated between the two plants and why? 3-Derive the short-run Total Cost, Average Cost and Marginal Cost Functions.

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter22: Supply: The Costs Of Doing Business

Section: Chapter Questions

Problem 11E

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