Problem
Creative Dangles is an earring design and manufacturing company. The production function for earrings is = 25KL, where Q = pairs of earrings per week, K = hours of equipment used, and L = hours of labor. Workers are paid $8 per hour, and the equipment rents for $8 per hour.
a. Determine the cost-minimizing capital labor ratio at this firm.
b. How much does it cost to produce 10,000 pairs of earrings?
c. Suppose the rental cost of equipment decreases to $6 per hour. What is the new cost-minimizing capital-labor ratio?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.