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I can use this exercise to have the basis for producing a quantity Q of one item with two input factors L and K. The

I can use this exercise to have the basis for producing a quantity Q of one

item with two input factors L and K. The product function is given by Q = F (L, K) = L0.3K

0.2.

a) Decisions the scale properties of the product function.

Assume further that the price per. unit L is given by w = 3 and that the price per. unit K is given by r = 2.

The company has a cost budget of C = 1000.

b) Formulation manufacturers product maximization problem in this case and find the optimal one

the factor composition

c) Exploit the manufacturer's cost function and find the marginal cost

Finally, assume that the price of input factor K rises to r = 4.

d) Now show that the optimal factor combination is characterized by K = 0.5L and fork what

this means

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