The Cobb-Douglas Production Function for a Company Is Given by P(k,l)=

question 35

Essay

The Cobb-Douglas production function for a company is given by P(k,l)= 70

where P is the monthly production value when k is the number of units of capital and l is the number of units of labor.Suppose that capital costs $450 per unit,labor costs $75 per unit,and the total cost of capital and labor is limited to $60,000.Use Lagrange multipliers to write the system of equations you would use to find the number of units of capital and labor that maximize production.

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Definitions:

Irrelevant Costs

Costs that should not influence decision-making because they will not change regardless of the outcome.

Sunk Costs

Past expenditures that have already been incurred and cannot be recovered or altered by current or future actions.

Decision Making

Selecting a course of action from competing alternatives.

Avoidable Cost

Costs that can be eliminated if a particular decision is made, such as discontinuing a product or service.