Kindly help explain all steps. Thanks a lot! Example 1: Let y = F(l, k) = 13kź be the production function, p = 30,w = 10, and r = 5. Find the optimum input combination (1*, k*) thatmaximizes the profit. This question can be formulated as

Answered: 1. 1 Example 1: Let y = F(l, k) = l¾k₹…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Kindly help explain all steps. Thanks a lot!

Expert Solution

Step 1

This problem could be solved by lagrangian function. The lagrangian function is a mixture of production function and constraints. The lagrangian function is use to find local maxima and minima of a function subject to equality constraint.

Given,

Production function: $y = l^{1 / 3} k^{1 / 2}$

s.t. p= lw + kr

30 = 10l + 5k

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