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?

A production function gives the technological relation between quantities of physical inputs and…

needs to produce 500 cups of coffee and the price of capital is 40 euro per unit and the price of labor (wage) is 20 euro per unit. If Karol minimizes costs, how much capital and how much labor should he employ?

needs to produce 500 cups of coffee and the price of capital is 40 euro per unit and the price of labor (wage) is 20 euro per unit. If Karol minimizes costs, how much capital and how much labor should he employ?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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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