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Assume that a firm produces a certain amount of a certain product (denoted by Q) with K units of capital and L units of labor.
Assume that a firm produces a certain amount of a certain product (denoted by Q) with K units of capital and L units of labor. Thus, the production function is given by Q = f(K, L) = (a K-B+b L-) -1/8 Also assume that the firm's budget constraint is given by R.K+W.L=S where R, W, and S represent interest rate, wage rate, and available fund, respectively. (1) Find the quantities of K and L that the firm must utilise, in order to maximise its output. (2) Assuming a = 0.5, b = 0.5, B = 0.5, R = 0.1 (that is, 10 percent), W= $35, and S=$1000, find the values of K and L that maximise Q. Assume that a firm produces a certain amount of a certain product (denoted by Q) with K units of capital and L units of labor. Thus, the production function is given by Q = f(K, L) = (a K-B+b L-) -1/8 Also assume that the firm's budget constraint is given by R.K+W.L=S where R, W, and S represent interest rate, wage rate, and available fund, respectively. (1) Find the quantities of K and L that the firm must utilise, in order to maximise its output. (2) Assuming a = 0.5, b = 0.5, B = 0.5, R = 0.1 (that is, 10 percent), W= $35, and S=$1000, find the values of K and L that maximise
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