Now the same with: F(K, L) A(8Kp + (1 8) Lp)/p. Let K be capital, L...

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Now the same with: F(K, L)" A(8Kp + (1 8) Lp)/p. Let K be capital, L labour, w is the vage (price of one unit of labour), r is the rental rate (price of one unit of capital. Set up the firms cost minimization problem. Solve for the Marginal Rate of Transformation of Labour for Capital (ie the rate at which a firm has to adjust labour for a one unit increase in capital to keep output constant). The answer here will be a function of the parameters of the production function as as well as labour L and capital K. Now the same with: F(K, L)" A(8Kp + (1 8) Lp)/p. Let K be capital, L labour, w is the vage (price of one unit of labour), r is the rental rate (price of one unit of capital. Set up the firms cost minimization problem. Solve for the Marginal Rate of Transformation of Labour for Capital (ie the rate at which a firm has to adjust labour for a one unit increase in capital to keep output constant). The answer here will be a function of the parameters of the production function as as well as labour L and capital K.

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To set up the firms cost minimization problem we need to determine the combination of capital K and ... View the full answer