An entrepreneur owns a factory with two plants that produce the same skateboards but differ in
the amount of capital and Labor in them. They are both represented by a simple Cobb-Douglas
production function without a technology component. Plant 1 has K1=1 and Plant 2 has K2=4
while w=$20 and v=$20.
1-Write both production functions and derive the respective MPL of each one. If the entrepreneur
wishes to minimize Short-Run total cost:
2-How would labor and output be allocated between the two plants and why?
3-Derive the short-run Total Cost, Average Cost and Marginal Cost Functions..
An entrepreneur owns a factory with two plants that produce .pdf
1. An entrepreneur owns a factory with two plants that produce the same skateboards but differ in
the amount of capital and Labor in them. They are both represented by a simple Cobb-Douglas
production function without a technology component. Plant 1 has K1=1 and Plant 2 has K2=4
while w=$20 and v=$20.
1-Write both production functions and derive the respective MPL of each one. If the entrepreneur
wishes to minimize Short-Run total cost:
2-How would labor and output be allocated between the two plants and why?
3-Derive the short-run Total Cost, Average Cost and Marginal Cost Functions.
