Dirt Diggers (DD) is a firm that excavates roadside ditches

| March 29, 2017

Question
Dirt Diggers (DD) is a firm that excavates roadside ditches for laying drainpipes. Its output follows the production function Q = 10L – 0.1L2; where L denotes labour hours and Q the length of the ditch in metres. The firm hires labour at a wage of $12 per hour. Hint: MRPL = MRCL; find the factors. a) DD has received an offer to excavate 250 metres for a price of $500. Should DD accept the offer? (04 marks) b) What offer would be profitable?

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