ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Karol has a coffee shop and produces coffee drinks under the production function Q = F(K,L) = 5K + L, where Q is the number of cups generated per hour, K is the number of coffee machines (capital), and L is the number of employees hired per hour (labor). Suppose Karol needs to produce 500 cups of coffee and the price of capital is 40 euros per unit and the price of labor (wage) is 20 euros per unit. If Karol minimizes costs, how much capital and how much labor should he employ?
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Transcribed Image Text:Karol has a coffee shop and produces coffee drinks under the production function Q = F(K,L) = 5K + L, where Q is the number of cups generated per hour, K is the number of coffee machines (capital), and L is the number of employees hired per hour (labor). Suppose Karol needs to produce 500 cups of coffee and the price of capital is 40 euros per unit and the price of labor (wage) is 20 euros per unit. If Karol minimizes costs, how much capital and how much labor should he employ?
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