A firm faces the production function Q = 2K02L06 and can buy L at £240 a %3D unit and K at £4 a unit. (a) If it has a budget of £16,000 what combination of K and L should it use to maximize output? (b) If it is given a target output of 40 units of Q what combination of K and L should it use to minimize the cost of this output?
A firm faces the production function Q = 2K02L06 and can buy L at £240 a %3D unit and K at £4 a unit. (a) If it has a budget of £16,000 what combination of K and L should it use to maximize output? (b) If it is given a target output of 40 units of Q what combination of K and L should it use to minimize the cost of this output?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![A firm faces the production function O = 2K2L0 and can buy L at £240 a
%3D
unit and K at £4 a unit.
(a) If it has a budget of £16,000 what combination of K and L should it use
to maximize output?
(b) If it is given a target output of 40 units of O what combination of K and
L should it use to minimize the cost of this output?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F6d4388d9-d500-459f-b12d-572cf956448e%2F656c6369-5024-43ce-a5fc-9d45b9a715a4%2Fw4sn6qq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A firm faces the production function O = 2K2L0 and can buy L at £240 a
%3D
unit and K at £4 a unit.
(a) If it has a budget of £16,000 what combination of K and L should it use
to maximize output?
(b) If it is given a target output of 40 units of O what combination of K and
L should it use to minimize the cost of this output?
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