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A firm's Cobb-Douglas production function has been estimated as = L 0.6 K 0.3 where is output, L is the number of units of labour,
A firm's Cobb-Douglas production function has been estimated as = L0.6K0.3 where is output, L is the number of units of labour, and K is the number of units of capital. The marginal product of labour is = 0.6L-0.4K0.3 and the marginal product of capital is K = 0.3L0.6K-0.7.The price per unit of labour is 5 and the price per unit of capital is 10. The firm has a budget of 720. What is the firm's output maximizing combination of L and K? Explain how you arrive at your answer.
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