=Let F (L,K) = Max {L, 2K} be a firm's production function. Let P₁1, PK = 6, and the total budget be 600,000 dollars. How much laborand capital should this firm optimally hire to maximize its profit? Doesthis production function satisfy the law of diminishing returns? Whatabout decreasing returns to scale? Explain. Calculate the firm's demandfunctions for both labor and capital.

production function Q=F(L,K)=Max(L,2K) Price of labor(L)=PL=1 and price of capital (K)=PK=6 budget…

Answered: Let F (L, K): = 1, PK = Max {L, 2K} be…

Let F (L, K): = 1, PK = Max {L, 2K} be a firm's production function. Let P₁ = 6, and the total budget be 600,000 dollars. How much labor

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

=
Let F (L,K) = Max {L, 2K} be a firm's production function. Let P₁
1, PK = 6, and the total budget be 600,000 dollars. How much labor
and capital should this firm optimally hire to maximize its profit? Does
this production function satisfy the law of diminishing returns? What
about decreasing returns to scale? Explain. Calculate the firm's demand
functions for both labor and capital.

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