REGISTRATION NUMBER: 19/09/01/041

COURSE TITLE: PRODUCTION ECONOMY

COURSE CODE: ECO411

DATE: 31st MARCH, 2024.

1(a) P(L,K) = 30L0.9 K0.1

L = 900. K = 1800

P(K) = 30L0.9 K0.1

C = wL + rK

108,000 = wL + rK λ(108,000 - wL + rK)

U = 30L0.9 K0.1 + 108,000λ - wLλ + rKλ

Take the partial difference with respect to L, K, λ

U2 = 0.9 × 30L0.9 - 1 K0.1 - wλ

2 + L-0.1 K0.1 - wλ .............(1)

Uk = 0.1 × 30L0.9 K0.1 - 1 - rλ

3L0.9 K -0.9 = rK ..................(2)

Uλ = 108,000 - wL - rK

= 108,000 = wL - rK

Divide equation (1) by (2)

= 27 - 0.1 K0.1/3L0.9K0.9 = wλ/rλ

= 9L-0.1 K0.1/L0.9K-0.9 = w/r

= 9L-1 K = w/r

= 9K/L = w/r

L = 9K w/r
= 108,000 = w(9K w/r) + rK

= 108,000 = 9Kr + rK

= 108,000/10 = 10Kr/10

Kr = 10,800

K = 10,800/r

K = 10,800/1800

K=6

= 108,000 = wL + rK

= 108,000 = wL + (10,800/r)

= 108,000 = wL + 10,800

= 108,000 - 10,800 = wL

= 97,200/w = wL/w

L = 97,200/900

L = 108

1(b) P(L,K) = 30L0.9K0.1

= 30(180)0.9 (6)0.1

= 2028.6290 × 1.1962

= 2426.64607

= 2427

2(a) MUK/MUL = PK/PL

= P(L,K) = 11L0.9K0.1

= dq/dL = 0.1 × 11L0.9-1 K0.1-1

= 0.9 × 11L-0.1K0.1/0.1 × 11L0.9K-0.1 = 200/400

= 9L-1K = 0.5

K/L = 0.055

K = 0.055L

C(LK) = 200L + 400K = 19,000

= 200L + 400(0.055L) = 19,000

= 200L + 22L = 19,000

= 222L/222 = 19,000/222

L = 85.58

K = 0.055L

K = 0.055(85.58)

K = 4.7069

2(b) C(K,L) = 200L + 400

C(L,K) = 200(85.58) + 400

=17116 + 1882.76

=18998.76

=18999

This is the minimum total production cost