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corie corie
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6 years ago
Acme Container Corporation produces egg cartons that are sold to egg distributors.  Acme has estimated this production function for its egg carton division:
   Q = 25L0.6K0.4,       
where Q = output measured in one thousand carton lots, L = labor measured in person hours, and K = capital measured in machine hours.  Acme currently pays a wage of $10 per hour and considers the relevant rental price for capital to be $25 per hour. Determine the optimal capital-labor ratio that Acme should use in the egg carton division.
Textbook 
Microeconomics

Microeconomics


Edition: 8th
Author:
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#1
6 years ago
MPL = .6(25) L-0.4K0.4 = 15
MPK = .4(25) L0.6K-0.6= 10
MRTS = 
MRTS =   = 1.5  ∙ 
MRTS = 1.5
Equate MRTS to  .
   1.5  = 
   1.5  = 0.4
1.5K = 0.4L; K=0.266L
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