- Question 6 5 Marks Each Part A Local Garage Owner Who S Got Special Interest In Economics Has Estimated That His Pro 1 (78.19 KiB) Viewed 45 times
Question 6. (5 marks each part A local garage owner, who's got special interest in economics, has estimated that his production function is given by Q = 1K + VL, where v denotes a square root, Q is the number of cars serviced per week, K and L are the amounts of capital and labour used to deliver the service. a. Show an expression for the marginal product of labour and capital, MPL and MPK, respectively. b. The prices of capital and labour are £6 and £0 per unit, respectively. Write down an expression for the firm's total cost. C. The firm has to service 12500 cars at the lowest cost possible. Write down a Lagrangian for this cost minimization problem. d. Find the first order conditions (FOC's) corresponding to the above Lagrangian. e. Find the cost-minimizing amounts of capital and labour (fractional quantities are accepted).