You run a small bakery, specializing in cookies. You produce cookies using capital (K) and labour (N), and the number of cookies you produce is governed by the following production function: (,)=201/21/2F(K,N)=20K1/2N1/2. You operate in competitive labour and product markets. You can sell cookies at a price of $2 each. You must pay =10w=10 for a unit of labour, and =40r=40 for a unit of capital. [Note: given this production function, =MRTS=KN and =101/21/2MPN=10K1/2N1/2]

You decide that your long-run profit maximizing number of cookies to produce is =4,000Q=4,000. How much labour and capital will you employ? Illustrate your answer with a carefully labelled graph.