A firm has the following Cobb-Douglas production function:
F(K,L)=10K.5L.5
Prices are w=1 and r=2
1) Compute the long-run cost function.
Step 1: Find the optimal proportion of K and L
ANS: 2K=L
Step 2: Find the Factor Demand for Labor and Capital
(L and K as functions of q)
K*=q/10(2^.5)
I understand everything up to here
but I don't understand how to get L*
answer for L* is 2q/10(2^.5)
can anyone help explain this to me?
This post was edited by shadex151 on Oct 11 2014 12:10am