A Cobb-Douglas production function for new company is given by f(x, y) = 45?4/9?5/9, where x represents the units of labor and y represents the units of capital.

A Cobb-Douglas production function for new company is given by f(x, y) = 45?^4/9?^5/9, where x represents the units of labor and y represents the units of capital. Suppose units of labor and capital cost $100 and $50 each respectively. If the budget constraint is $4,500:

(1) Find the optimal combination of labor and capital units to maximize the production level for this manufacture.

(2) Find the value of shadow price and interpret it.

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Expert Solution

Rahul Sunny answered 2 years ago

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