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    output, revenues, costs, and profits

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    The Alex Co. uses two inputs, A and B, to produce boats. The production function for boats is given by
    Q = A^0.5 x B^0.5, (or the square root of A multiplied times the square root of B)
    and the marginal products of A and B are given by
    MPa = 0.5Q/A
    MPb = 0.5Q/B

    The prices of inputs are given by Pa = $10 and Pb = $10
    and the price of boats equals $30.

    (a) If the Alex Co. has a total budget of $200 to spend on purchasing inputs, how many units of A and B should it hire?

    (b)What will be its output, revenues, costs, and profits?

    © BrainMass Inc. brainmass.com October 9, 2019, 11:11 pm ad1c9bdddf

    Solution Preview

    We have budget equation as 10A+10B=200
    Solving we get A=20-B ------1.

    Also we know that for ...

    Solution Summary

    This solutions finds output, revenues, costs, and profits.