(Answered) Optimal choice of L and K for Rosenberg

Management Studies

Problem: Rosenberg produces board games using Labour(L) and machines(K) as inputs. His board game production function is given as follows:

Q = f(K; L) = 2L^2K2 Rosenberg faces labour costs of $3 per unit of labour and capital costs of $5 per unit of capital. Rosenberg wants to produce as many board games as possible but only has $1000 at his disposal and is not able to spend more than that.

Required:

(a) What is the optimal choice of L and K for Rosenberg? How many board games are produced at this amount of L and K?

(b) Due to a short supply of labour, labour costs now rise to $5 per unit of labour. What is the new optimal choice for the firm?

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Business Management, Management Studies

Category:- Business Management
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