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Let F(L,K)= Max {L,2K} be a firm's production function. Let P_L=1, P_K=6, and the total budget be 600,000 dollars. How much labor and capital should
Let F(L,K)= Max {L,2K} be a firm's production function. Let P_L=1, P_K=6, and the total budget be 600,000 dollars. How much labor and capital should this firm optimally hire to maximize its profit? Does this production function satisfy the law of diminishing returns? What about decreasing returns to scale? Explain. Calculate the firm's demand functions for both labor and capital.
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