For their optimal output what is the Marginal Rate of Technical Substitution?

B Manufacturing Inc. a manufacturer of packaging products is attempting to select a short run str Show more S&B Manufacturing Inc. a manufacturer of packaging products is attempting to select a short run strategy which maximizes the long run value of expected future profits. Their long run value will depend upon their competitors response. The controller projects the following expected future profits cost and revenue equations. 42 Points States of Nature S&Bs Decision Alternatives Maximize Revenue Maximize Profits Maximize Revenue $6 million $8 million Maximize Profit $2 million $14 million TR = 1600q -2q 2 P = 1600-2q MR = 1600 -4q q = 50L 1/2 k 1/2 MPL=25L -1/2 k 1/2 MPK=25L 1/2 k -1/2 Price of Labor = $25 Price of Capital = $100 MC = 2 A) Which decision alternative should S&B chose given a maximin criterion? (4.2 points) B) Calculate the opportunity loss or regret matrix. (4.2 points) C) Which decision alternative should S&B chose given a minimax regret criterion? (4.2 points) D) Given your answer to part A compute following: 1. Optimal Price (4.2 points) 2. Optimal Output (4.2 points) 3 Optimal Quantity of Labor (4.2 points) 4. Optimal Quantity of Capital (4.2 points) 5. For their optimal output calculate Marginal Product of Capital and Marginal Product of Labor. (2.1 points each) 6. For their optimal output what is the Marginal Rate of Technical Substitution? (4.2 points) 7. For their optimal output show whether they using the least cost combination of labor and capital? (4.2 points) Show less

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