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Optimal number of employee

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Reference no: EM131395443

Please show all work in formulas.

Suppose that you have estimated the following output function where L is labor and K is capital:

Y = K1/2L1/2

You know that the current price of labor is $8 and capital cost is $150 per machine (capital).

You currently use 64 units of capital.

For a, the Output (Y) is 100.   

  • How many employees (L) do you need to hire to achieve your output goal?
  • Given a fixed level of capital (), and a price of $100 per unit of output, what is the optimal number of employees?  You do not need to know Output (Y) for this question.
  • Calculate the profit given the optimal number of employee given the answer in b. 
  • At What number of employees would you maximize output but not lose money?

Reference no: EM131395443

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