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Question 7. Sam and Erica are starting a new restaurant in Portland, Oregon. While Sam plans to do the cooking himself, he will need

 

Question 7. Sam and Erica are starting a new restaurant in Portland, Oregon. While Sam plans to do the cooking himself, he will need to employ workers and machinery to produce food. He estimates his production function as: q = 15LK. Sam is able to accumulate $10,000 to finance the business. Workers cost $10 per unit and capital costs $50 per unit. a. If Sam wishes to produce the most output with the finances available, how much labor and capital should Sam employ? Use a Lagrangian to solve this problem. Does this bundle of capital and labor also minimize the costs? b.

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