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Microeconomics Question. Laubour task help

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A maize farmer produces using two inputs labour(L) and fertilizer(K) the farmers total cost function is given as TC=(0.5r+√(rw)+0.5w)q, where q is output of maize in bags and r andw are the unit prices of fertilizer and labour respectively. Fertilizer is measured in bags. If the farmer's objective is to produce sh 10000 bags of maize, and fertilizer costs sh 1600 per bag and labour costs sh 100 per hour, how many bags of fertilizer will the farmer require to minimize cost?
asked Jul 19, 2017 in Economics by mirinda (220 points)

1 Answer

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Solution
TC = (0.5r + √(rw) + 0.5w)q
If the farmer's objective is to produce sh 10000 bags of maize, and fertilizer costs sh 1600 per bag and labour costs sh 100 per hour, then the amount of bags of fertilizer that the farmer will require to minimize cost is:
TC = (0.5r + √(rw) + 0.5w)q = (0.5*1600 + √(1600*100) + 0.5­*100)*10000 = (800 + 400 + 50)*10000 = sh 12,500,000.
The amount of bags of fertilizer can't be found, because we have no information about production function.

answered Jul 26, 2017 by admin (2,270 points)
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