Question

1. The production function of CB Chicken takes the following form: f(q) = 2L2/5K3/5. In addition, it pays $4 per unit to purchase labour and $15 per unit to hire capital with a weekly outlay of $12,200. The function is specified in terms of K and L as it uses capital
   11. and labour (L) in its production operation.
2. 1. Write down the cost constraint of the firm.                                      [2 marks]
3. 2. Set up the optimization problem using the Lagrangian approach.    [4 marks]
4. 3. Using calculus, derive the marginal product of labour function.      [2 mark]
5. 4. Using calculus, derive the marginal product of capital function.      [2 mark]
6. 5. Solve for the optimal combination of labour (L) and capital (K) using either the Lagrangian or the Optimal Employment Condition approach.         [10 marks]

Answer 1