An automobile manufacturing plant currently employs 1500 workers and has capital
Chapter 8, Problem 43(choose chapter or problem)
An automobile manufacturing plant currently employs 1500 workers and has capital investment of 15 million dollars per month. The production function is Q = x0.4y0.6, where Q is the number of cars produced per month, x is the number of workers and y is capital investment. Each workers salary is $5000 per month and each unit of capital costs $4000 per month. (a) How many cars is the factory currently assembling each month? (b) Due to the sluggish economy, the factory decides to decrease production to 2000 cars per month. The factory wants to minimize the cost of producing these 2000 cars. How many workers will need to be laid off? By what amount should monthly investment be decreased? (c) Give the value of the Lagrange multiplier, , and interpret it in terms of the car factory.
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