Ms. Adadzewa has to set up a firm that produces soft drinks competing with the likes of Pepsi and Coca Cola. In order fo

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Ms Adadzewa Has To Set Up A Firm That Produces Soft Drinks Competing With The Likes Of Pepsi And Coca Cola In Order Fo 1 (63.29 KiB) Viewed 33 times

Ms. Adadzewa has to set up a firm that produces soft drinks competing with the likes of Pepsi and Coca Cola. In order for to estimate the amount of labour and capital needed to maximise profit in the long run, Ms. Adadzewa has employed you to help him in this regard. Currently, the competitive wage rate is set at c2 per unit of labour and capital is rented at £18 per unit. The forces of demand and supply in the industry has also set the equilibrium price of the soft drink at $1.25 per unit. Suppose the production function of the firm is given as Q = 10K0.5 40.5 + 20 and the firm is contracted to produce a total of 770 soft drinks. • Find the optimal levels of capital and labour needed to minimise cost. • The maximum profit of the firm at the optimal levels of labour and capital.