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26. A rm produces output with the production function Q = KL + K. Further, w = 1, r = 2. A) Explain clearly whether
26. A rm produces output with the production function Q = KL + K. Further, w = 1, r = 2. A) Explain clearly whether there are increasing, decreasing, or constant returns to scale. B) Clearly provide the appropriate Lagrangian for the problem of maximizing output for a given cost (i.e.. the dual problem). C) Use the Lagrangian to nd how much labor and capital the rm should use if it wants to optimally spend $ 1 00. D) Derive the rm's long-run demand for labor function L(Q,W,r).
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