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
We have budget equation as 10A+10B=200
Solving we get A=20-B ------1.
Also we know that for ...
This solutions finds output, revenues, costs, and profits.