Question: Consider a market where the price of labor is 2 and the price of a unit of capital is 1. A firm has the following

Consider a market where the price of labor is 2 and the price of a unit of capital is 1. A firm has the following production function Q = sqrt(K) + sqrt(L) where K is the amount of capital the firm uses and L is labor.

1) What’s the marginal rate of technical substitution for this firm at any combination of L and K?

2) Show that the cost minimizing combination of labor and capital for this firm has 4 times as much capital as it does labor.

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