Answer: P(120,30)= $1,218,365.5
So when the manufacturer invests $30 million in capital and 120,000 hours in labour yearly, the monetary value of production is about $1.2 million.
Explanation:
The Cobb-Douglas production function expresses the technological relationship between two inputs (labour and capital).
Since
P(L,K)=1.47L^0.65 K^0.35 (equation 1)
we simply substitute L=120,000 and K=30,000,000 into equation 1.
Thus, P(120,30)= 1.47(120,000)^0.65 (30,000,000)^0.35
<em>(Recall that L is in thousand of hours and K is in millions of dollars).</em>
P(120, 30)= 1.47(2002.02)(413.99)
Thus, P(120,30)= 1218365.475
P(120,30)= $1,218,365.5
P(120, 30)= $1.2 million
So when the manufacturer invests $30 million in capital and 120,000 hours in labour yearly, the monetary value of production is about $1.2 million
