5. The annual output for a luxury hotel chain is given by Q = 30K2/5 L1/2 R1/4, where K, L and R are the capital, labor and real estate inputs, all measured in $1,000,000 s, and Q is the average number of rooms rented per day. The hotel chain's annual budget is B = $69 million. (a) How should they allocate this budget to the three inputs in order to maximize their annual output? What is the maximum output? (b) What is the approximate change in the firm's maximum output if their annual budget increases by $500,000? Explain your answer.

5. The annual output for a luxury hotel chain is given by Q = 30K2/5 L1/2 R1/4, where K, L and R are the capital, labor and real estate inputs, all measured in $1,000,000 s, and Q is the average number of rooms rented per day. The hotel chain's annual budget is B = $69 million. (a) How should they allocate this budget to the three inputs in order to maximize their annual output? What is the maximum output? (b) What is the approximate change in the firm's maximum output if their annual budget increases by $500,000? Explain your answer.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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