Suppose that the production function is given by Q = 25L^ 0.5 K6 0.5 . The amount

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Suppose that the production function is given by Q = 25L^ 0.5 K6 0.5 . The amount of funds available to purchase the two inputs is R1500, the price of output (Py) is R4 and L and K both sell for R3.

(a) Set up a lagrangian optimization problem and derive the first-order conditions.

(b) How much L and K should the farmer produce to maximize profit?

(d) Prove that the total revenue is being maximized, that is, show that the determinant is positive.

Related Book For answer-question

Macroeconomics

ISBN: 9780132109994

1st Edition

Authors: Glenn Hubbard, Anthony Patrick O'Brien, Matthew P Rafferty

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Posted Date: Sep 16, 2022 08:12 AM

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Suppose that the production function is given by Q = 25L^ 0.5 K6 0.5 . The amount

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Expert Answer:

a The lagrangian optimization problem is as follows maximize C4Q3L3K subject to Q25L05K6 05 LK1500 L... View the full answer

Macroeconomics

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