Question:

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-B)-1/p 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, 3 = 0.5, R = 0.1 (that is, 10 percent), W=$35, and S=$1000, find the values of K and L that maximise