Optimal level of output and profit

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Reference no: EM13976437

Lindsey's Pretzel plant has the following short-run function: C(q,K) = (wq^3) / (1,000K^1.5) + 50K Where q is Lindsey's output level, w is the cost of a labor hour, and K is the number pretzel machines Lindsey leases. Lindsey's short-run marginal cost curve is MC(q,K) = (3wq^2) / 1000K^1.5 At the moment, Lindsey leases 10 pretzel machines, the cost of a labor hour is $6.85, and she can sell at the output she produces at $35 per unit.

a. Determine Lindsey's profit/loss.

b. If the cost per labor hour rises to $7.50, what happens to Lindsey's optimal level of output and profit?

Reference no: EM13976437

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