Consider the new Starbucks in Bethlehem. Suppose the wage is w = $9, and the cost...

Consider the new Starbucks in Bethlehem. Suppose the wage is w = $9, and the cost of capital is r = $1, and their production function for cups of coffee is q = 4K^0.5L^0.5

a) What is the least/minimum cost of inputs combination required to produce 120 cups of coffee?

b) What would be the total cost of producing 120 cups of coffee?

c) Suppose instead that capital was fixed at 25 units. What would be the implications for labor usage maintaining q = 120?

d) Keeping capital fixed at 25 units. What would be the implications for total cost maintaining q = 120?

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Expert Solution

Rahul Sunny answered 5 months ago

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