# Answer to Question #4506 in Microeconomics for Marcos

Question #4506

The Neo Corporation produces dream machines (software and hardware) that allows customers plugged in

to customize their dreams (e.g. you can be a pilot, or a martial arts expert). The Neo Corporation

production function is given by:

Q = 8L

0.5

K

0.5

,

where Q = output measured in number of dream machines,

L = labor measured in number of workers, and K = capital measured in number of mainframes. Neo

currently pays a wage of $400 per worker and considers the relevant rental price for capital to be $2500 per

mainframe.

Refer to Scenario 1. If Neo wants to produce 40 dream machines the optimal number of

workers to be hired is

a. Less than 2.

b. More than 2 but less than 4

c. More than 4 but less than 6

d. More than 6 but less than 8

e. More than 8

The answer is 8 but I don't know how.

to customize their dreams (e.g. you can be a pilot, or a martial arts expert). The Neo Corporation

production function is given by:

Q = 8L

0.5

K

0.5

,

where Q = output measured in number of dream machines,

L = labor measured in number of workers, and K = capital measured in number of mainframes. Neo

currently pays a wage of $400 per worker and considers the relevant rental price for capital to be $2500 per

mainframe.

Refer to Scenario 1. If Neo wants to produce 40 dream machines the optimal number of

workers to be hired is

a. Less than 2.

b. More than 2 but less than 4

c. More than 4 but less than 6

d. More than 6 but less than 8

e. More than 8

The answer is 8 but I don't know how.

Expert's answer

The answer is e(more than 8) as L=12,5

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