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.

Expert Solution

Rahul Sunny answered 2 years ago

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