You are the manager of a firm and you are required to optimize the Cobb-Douglas function given the following parameters. The maximum amount of money available to spend is $340 where the price of K=8 and the price of L=4. That is Pk=8 and Pl=4. The function is given as q=K0.4L0.6 . What is the constraint equation?

You are the manager of a firm and you are required to optimize the Cobb-Douglas function given the following parameters. The maximum amount of money available to spend is $340 where the price of K=8 and the price of L=4. That is Pk=8 and Pl=4. The function is given as q=K0.4L0.6 . What is the constraint equation?

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter29: Resource Markets

Section: Chapter Questions

Problem 3E

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You are the manager of a firm and you are required to optimize the Cobb-Douglas function given the following parameters. The maximum amount of money available to spend is $340 where the price of K=8 and the price of L=4. That is Pk=8 and Pl=4. The function is given as q=K0.4L0.6 . What are the optimal values K0 and L0 ? a. None of the above b. K0≈68,L0≈34 c. K0≈72,L0≈18 d. K0≈34,L0≈68
You are the manager of a firm and you are required to optimize the Cobb-Douglas function given the following parameters. The maximum amount of money available to spend is $340 where the price of K=8 and the price of L=4. That is Pk=8 and Pl=4. The function is given as q=K0.4L0.6 . What is the Lagrangian? a. None of the above b. K0.4L0.6−λ(340−8K−4L) c. K0.4L0.6+λ(340−8K−4L) d. K0.4L0.6+λ(340+8K+4L)
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