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Question: precision stamping is a subcontractor for the ford motor company...

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Precision Stamping is a sub-contractor for the Ford Motor Company with two small production facilities at different locations. Precision Stamping’s production function at facility #1 is: Q = 10,000*min(4K,6L), where K denotes the number of industrial stamping machines, and L denotes the number of workers. Their production function at facility #2 is: Q = 15,000*min(3K,3L).

a) What is the output expansion path for Precision Stamping’s production function at facility #1?

b) Draw and label Precision Stamping’s isoquants corresponding to Q=60,000 and Q=120,000 at facility #1. Place K on the vertical axis.

c) Suppose that K is fixed at K0=4 at both facilities. What are the values of the marginal product of labor as the labor input varies from L=0 to L=4 (in one unit increments) at both facilities?

d) Suppose Precision Stamping wants to allocate 3 workers across its two facilities in order to maximize production. How should it allocate its workers? Why? What is total output across both facilities at this allocation?

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