Acme Container Corporation produces egg cartons that are sold to egg distributors. Acme has estimated this production function for its egg carton division:
Q = 25L^0.6K^0.4,
where in one thousand carton lots, in person hours, and in machine hours. Acme currently pays a wage of $10 per hour and considers the relevant rental price for capital to be $25 per hour. Determine the optimal capital-labor ratio that Acme should use in the egg carton division.

Question

Acme Container Corporation produces egg cartons that are sold to egg distributors. Acme has estimated this production function for its egg carton division:
Q = 25L^0.6K^0.4,
where

in one thousand carton lots,

in person hours, and

in machine hours. Acme currently pays a wage of $10 per hour and considers the relevant rental price for capital to be $25 per hour. Determine the optimal capital-labor ratio that Acme should use in the egg carton division.

Quizplus · Accepted Answer

The Answer of Acme Container Corporation produces egg cartons that are sold to egg distributors. Acme has estimated this production function for its egg carton division: Q = 25L^0.6K^0.4, where in one thousand carton lots, in person hours, and in machine hours. Acme currently pays a wage of $10 per hour and considers the relevant rental price for capital to be $25 per hour. Determine the optimal capital-labor ratio that Acme should use in the egg carton division.

Acme Container Corporation Produces Egg Cartons That Are Sold to Egg