Crew Brew Produces a Popular Brand of Beer in Its

question 42

Essay

Crew Brew produces a popular brand of beer in its mini-brewery located on a small river in Wisconsin. It uses a special formula, combined with the fresh water from the local stream, to produce a drink popular with local folks and tourists who visit during the summer fishing season, and autumn deer hunting season. Crew's production function is: Q = 50K + 50L, where Q = barrels of beer, K = units of capital, and L = units of labor.
(a) Suppose that capital can be purchased for $8 per unit, and labor costs $6 per unit. What is the optimal combination of inputs for the firm to employ?
(b) Suppose that the cost of inputs changes to $7 for a unit of capital, and $9 for a unit of labor. What is the new optimal combination of inputs?
(c) Explain the context in which a firm may use inputs in the combination described above.

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Definitions:

Endometrium

The uterine lining.

Seminiferous Tubules

Coiled tubules in the testes in which spermatogenesis takes place in male vertebrates.

Seminal Vesicles

Seminal vesicles are male reproductive glands that produce and secrete a fluid that forms part of the semen, which provides nutrition and motility to sperm.

Prostate Gland

A gland in the male reproductive system that surrounds the neck of the bladder and urethra and produces a fluid that is a component of semen.