The production function is f(x1; x2) = x1^1/2x2^1/2. The price of factor 1 is 16, the price
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The production function is f(x1; x2) = x1^1/2x2^1/2. The price of factor 1 is 16, the price of factor 2 is 32, and the price of output is 64.
(a) Write down the profit function as a function of both the inputs.
(b) Write down the long run profit maximization conditions.
(c) In what proportions should the firm use factors 1 and 2 if it wants to maximizeprofits?
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