1. You are a manager at Glass Inc.—a mirror and window supplier. Recently, you conducted a study of the production process for your single-side encapsulated window. The results from the study are summarized in the table below and are based on the 8 units of capital currently available at your plant. Workers are paid $60 per unit, per unit capital costs are $20, and your encapsulated windows sell for $12 each. Given this information, what is your optimal labor and output decision?
Given these decisions, what will be your profit?
2. A firm produces output according to the production function:
Q = F(K,L) = 4K + 8L.
a. How much output is produced when K = 2 and L = 3?
b. If the wage rate is $60 per hour and the rental rate on capital is $20 per hour, what is the cost-minimizing input mix for producing 32 units of output?
c. If the wage rate decreases to $20 per hour but the rental rate on capital remains at $20 per hour, what is the cost-minimizing input mix for producing 32 units of output?