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Production Function and Price of Labor

Suppose that the Johnson Company has the following production function:
Q = L × C

The price of labor (L) is $20 per unit and the price of capital (C) is $50/unit. How much labor and capital should Johnson employ to produce 200,000 units? What is the total cost of production?

Solution Preview

Here, Q = LC = 200,000
For efficeincy, MUL/PL = MUC/PC
or C/L = ...

Solution Summary

This solution contains step-by-step calculations to determine the total cost of production using efficiency, price of capital and labour.