Constrained Optimization: Cobb-Douglas Production Function: 1. Based from the factor shares of the two inputs, what will happen to the number of output if it the firm decides to triple both the amount of labor and capital? 2. State the optimization problem of the firm. 3. Solve for the formulas of the Marginal Product of Labor (MPL), and Marginal product of Capital (MPK)
Constrained Optimization: Cobb-Douglas Production Function:
1. Based from the factor shares of the two inputs, what will happen to the number of output if it the firm decides to triple both the amount of labor and capital?
2. State the optimization problem of the firm.
3. Solve for the formulas of the Marginal Product of Labor (MPL), and Marginal product of
Capital (MPK)
4. Using your knowledge of the tangency condition in Producer’s theory, find the combination
of K and L that the firm should use to produce the maximum possible output. Do not solve
the problem using the Lagrangian method.
Note: The tangency conditions just states that the slope of the production function must be
equal to the slope of the isocost function.
5. What is the maximum possible output that the firm could earn given the constraint it faces?
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