There are 2 firms (i = 1,2) in an economy, which use capital only to produce final output. The production function for Firm i takes the following form: Y; = A¿K}/2 (1) Assume that Aı = 1 and A2 = 2, and there are 5 units of capital in this economy. What is the optimal allocation of capital between these two firms?
There are 2 firms (i = 1,2) in an economy, which use capital only to produce final output. The production function for Firm i takes the following form: Y; = A¿K}/2 (1) Assume that Aı = 1 and A2 = 2, and there are 5 units of capital in this economy. What is the optimal allocation of capital between these two firms?
Chapter1: Making Economics Decisions
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![There are 2 firms (i= 1,2) in an economy, which use capital only to produce final output.
The production function for Firm i takes the following form:
-1/2
Y; = A;K;1²
(1)
Assume that A1 = 1 and A2 = 2, and there are 5 units of capital in this economy. What is
the optimal allocation of capital between these two firms?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F85bc5da6-eee5-4287-8a71-18810ce8fb0b%2F67f9c5cc-f928-4e49-91f2-2b6d0d7ab222%2Fye4zt66_processed.png&w=3840&q=75)
Transcribed Image Text:There are 2 firms (i= 1,2) in an economy, which use capital only to produce final output.
The production function for Firm i takes the following form:
-1/2
Y; = A;K;1²
(1)
Assume that A1 = 1 and A2 = 2, and there are 5 units of capital in this economy. What is
the optimal allocation of capital between these two firms?
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