Craig and Javad run a paper company. Each week they need to produce 1,000 reams of paper to ship to their customers. The paper plant's longrun production function is Q = 4KL, where Q is the number of reams produced, K is the quantity of capital rented, and L is the quantity of labor hired. The weekly cost function for the paper plant is C = 20K+ 4L, where C is the total weekly cost. (a) What ratio of capital to labor minimizes Craig and Javad's total costs? (b) How much capital and labor will Craig and Javad need to rent and hire in order to produce 1,000 reams of paper each week? (c) How much will hiring these inputs cost them?
Craig and Javad run a paper company. Each week they need to produce 1,000 reams of paper to ship to their customers. The paper plant's longrun production function is Q = 4KL, where Q is the number of reams produced, K is the quantity of capital rented, and L is the quantity of labor hired. The weekly cost function for the paper plant is C = 20K+ 4L, where C is the total weekly cost. (a) What ratio of capital to labor minimizes Craig and Javad's total costs? (b) How much capital and labor will Craig and Javad need to rent and hire in order to produce 1,000 reams of paper each week? (c) How much will hiring these inputs cost them?
Chapter7: Production And Cost In The Firm
Section: Chapter Questions
Problem 3.7P
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Transcribed Image Text:Craig and Javad run a paper company. Each week they need to produce 1,000
reams of paper to ship to their customers. The paper plant's longrun production
function is Q = 4KL, where Q is the number of reams produced, K is the quantity
of capital rented, and L is the quantity of labor hired. The weekly cost function for
the paper plant is C = 20K + 4L, where C is the total weekly cost. (a) What ratio of
capital to labor minimizes Craig and Javad's total costs? (b) How much capital and
labor will Craig and Javad need to rent and hire in order to produce 1,000 reams of
paper each week? (c) How much will hiring these inputs cost them?
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