A sandwich shop needs to hire sandwich makers. It can hire low productivity workers (x1), high...

A sandwich shop needs to hire sandwich makers. It can hire low productivity workers (x1), high productivity workers (x2), or a combination of both. The firm’s production function is: f(x1, x2) = x1+2x2

a) What kind of production function does the firm have?

b) The firm is willing to pay low productivity workers $15/hour. What is the most it would be willing to pay high productivity workers if it is to hire any high productivity workers?

c) Suppose the firm is paying low productivity workers $15 and high productivity workers $25. What are the firm’s profits if it can sell its product for $20 a unit and can produce a maximum of 200 units?

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Rahul Sunny answered 1 year ago

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