question archive The processing of payroll for the 10
The processing of payroll for the 10
Subject:EconomicsPrice: Bought3
The processing of payroll for the 10.000 workers in a large firm can either be done using 1 hour of computer time (denoted by K) and no clerks or with 10 hours of clerical time (denoted by L) and no computer time. The production function is given by: Q=10,000K+1,000L Computers and clerks are perfect substitutes, for example, the firm could also process its payroll using 1 2 hour of computer time and 5 hours of clerical time. a) Sketch the isoquant that shows all combinations of clerical time and computer time that allows the firm to process the payroll for 10,000 workers (Q=10,000). b) Suppose computer time costs $ 30 per hour and clerical time costs $ 5 per hour. What are the cost- minimizing choices of L and K? What is the minimized total cost of processing the payroll? Show the isoquant and isocost associated with your solution. c) Suppose the price of clerical time remains at $ 5 per hour. How high would the price of an hour of computer time have to be before the firm would find it worth-while to use only clerks to process the payroll?
