Essay
The We Make Them Like They Used To Manufacturing Company, Inc produces Victorian wood molding for the booming home restoration market. As they have only recently entered the market, WMTLTUMC, Inc produces only one product - bullet molding. A production function for this single product firm can be expressed as follows:
Q = 60L + 30K + .75LK
where:
Q = number of pallets containing 1000 board feet of molding produced per day
L = units of labor input used per day
K = units of capital input used per day
They are currently utilizing 100 units of capital per day, and 60 units of labor per day. As this process requires highly skilled labor, the price of labor is currently $18.00 per unit and the price of a unit of capital is $6.00. These prices are expected to remain constant into the foreseeable future. Is WMTLTUMC, Inc operating its woodworking facility at a least-cost combination of inputs? Why or why not?
Correct Answer:
Verified
Correct Answer:
Verified
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