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8. Suppose a firm uses capital (K) and labor (L) to produce. The firm's production function is Q = In(K) + 21n(L) where Q is
8. Suppose a firm uses capital (K) and labor (L) to produce. The firm's production function is Q = In(K) + 21n(L) where Q is the output quantity; A is units of capital input; and L is number of workers. Let the wage rate of workers be w = 4, and the rental price of capital be r = 2. The output price is p = 1 per unit. The firm operates in competitive input and output markets. What is the profit maximizing combination of K and L? (a) K = L =0.5 (b) K = L =1 (c) K = L =2 (d) K = 2, 1 =1 6 (e) K = 1, L = 2 (f) K = 5, L = 10 (g) K = 10, L = 5 (h) K = 0, L =5 (i) K = 1, 1 =4 () K = 4, L =1
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