Reference no: EM131589112

You are a manager for Herman Miller, a major manufacturer of office furniture. You recently hired an economist to work with engineering and operations experts to estimate the production function for a particular line of office chairs. The report from these experts indicates that the relevant production function is:

Q = 8(K)^1/2(L)^1/2

where K represents capital equipment and L is labor. The marginal product of labor and capital are:

MPL = (½)8K^1/2L-1/2

MPK = (½)8L^1/2K-1/2

Your company has already spent a total of $8,000 on the 9 units of capital equipment it owns.

Due to current economic conditions, the company does not have the flexibility needed to acquire additional equipment. If workers at the firm are paid a competitive wage of $120 per day and chairs can be sold for $400 each.

a) What is your profit- maximizing level of labor usage?

L = Answer

b) What is the profit maximizing level of output?

Q = Answer

c) What are the variable costs when the firm maximizing profits?

VC = $Answer

d) What are the profits when the firm maximizes profits?

Profits = $