Nadine has a production function 4x1 + x2. If the factor prices are $12 for fact
ID: 1110530 • Letter: N
Question
Nadine has a production function 4x1 + x2. If the factor prices are $12 for factor 1 and $2 for factor 2, how much will it cost her to produce 30 units of output?
answer: $60
The production function is f (L, M) = 4L^1/2M^1/2, where L is the number of units of labor and M is the number of machines used. If the cost of labor is $49 per unit and the cost of machines is $16 per unit, then the total cost of producing 5 units of output will be
answer. $70.
I want to know how to do these two. more specific i appreaciate
Explanation / Answer
1)MP of X1=4 and X2=1
P1=12 and P2=2
Since MPx1/Px1<MPx2/Px2
Thus only X2 will be uses and to produce Q=30 we need X2=30 and total cost=30*2=60
2)MrTS=4M/2L=49/16
M=49/32L
Q=4(1.2374L)
L=Q/4.9697 when Q=5. Then L=1 and M=1.2374
Total cost=49*1+16(1.23)=70
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