Business, 27.08.2021 20:40, jeremiah52

Roberta runs a dress factory. She needs to produces 80 dresses per day, using a combination of labor and sewing machine. She can hire as much labor as she wants at a cost of $10 per unit. She can rent as much sewing machine as she wants at a cost of $2.5 per unit. Her production function is y=5L1/2M1/2, where L is the amount of labor and M is the amount of machine. a. Write the equation for MRTS is:
MRTS=M/L 2M/L M1/2/L1/2 M/2L
(Hint: MPL=2.5L-1/2M1/2, MPM=2.5L1/2M-1/2
b. Find out Roberta’s demand for L and M, which can produce 100 dresses in the cheapest possible way.
c. Based on the solution from question b, calculate the lowest cost to product 100 dresses.
d. The local government raised the minimum wage from $10 to $22.5 per unit, ie the cost of labor is $22.5 now. With the new prices, calculate the lowest cost to produce 60 dresses.

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Roberta runs a dress factory. She needs to produces 80 dresses per day, using a combination of labor...