You manage a plant that mass-produces engines by teams of workers using assembly machines. The te… 1 answer below »

You manage a plant that mass-produces engines by teams of
workers using assembly machines. The technology is summarized by
the production function q = 5KL where q is the number of engines
per week, K is the number of assembly machines, and L is the number
of labor teams. Each assembly machine rents for r = 10, 000 per
week, and each team costs w = 5, 000 per week. Engine costs are
given by the cost of labor teams and machines, plus 2, 000 per
engine for raw materials. Your plant has a fixed installation of 5
assembly machines as part of its design. a) What is the cost
function for your plant? (how much would it cost to produce q
engines). What are the average and marginal costs? How do average
costs vary with output? b) How many teams are required to produce
250 engines? What is the average cost per engine? c) You are asked
to make recommendations for the design of a new production
facility. What capital/labor (K/L) ratio should the new plant
accommodate if it wants to minimize the total cost of producing at
any level of output q?

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