Question
In: Economics
Suppose that a firm's production function for Temoc plush toys is given by the following formula:...
Suppose that a firm's production function for Temoc plush toys is given by the following formula: Q=12(EO+EG)^(1/3)
where EO is the number of orange workers and EG is the number of green workers.
The wage that orange workers receive is $7, and the wage for green workers receive is $4. The price of a Temoc Plush Toy is $9.
How many Green and Orange Workers will a profit maximizing firm hire?
Solutions
Expert Solution
MP of orange workers
MP_O = (12/3)*(EO + EG)-2/3
MP_G = (12/3)*(EO+EG)-2/3
Then at eqm, VMP = wage
VMP = Price of output*MP
as MP of two types of workers is equal, so hire the workers which has to paid lower wages , so hire only GREEN WORKERS
SO EO*= 0
FOR EG*, 9*MP_G = 4
36*(EG)-2/3 = 4
9 = EG2/3
EG = 27
Rahul Sunny answered 2 years agoRelated Solutions
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