LM Corp. has estimated that it has the following production function: Q = 4LK + 0.5L2 0.5K2
Labor costs $60 and capital costs $70. LM wants to maximize output subject to the cost constraint of $1900.
(a) What amount of labor and capital should be used? (b) What is the total output from the above combination? (c) What is the optimal combination of labor and capital if capital cost increases to $80?
