Question

The Neo Corporation produces dream machines (software and hardware) that allows customers plugged in
to customize their dreams (e.g. you can be a pilot, or a martial arts expert). The Neo Corporation
production function is given by:
Q = 8L
0.5
K
0.5
,
where Q = output measured in number of dream machines,
L = labor measured in number of workers, and K = capital measured in number of mainframes. Neo
currently pays a wage of $400 per worker and considers the relevant rental price for capital to be $2500 per
mainframe.

Refer to Scenario 1. If Neo wants to produce 40 dream machines the optimal number of
workers to be hired is
a. Less than 2.
b. More than 2 but less than 4
c. More than 4 but less than 6
d. More than 6 but less than 8
e. More than 8
The answer is 8 but I don't know how.

Answer 1

The answer is e(more than 8) as L=12,5