1. Firm Fiat Lux, a light bulb company, has the production function q = 2L 0.5K...

1. Firm Fiat Lux, a light bulb company, has the production function q = 2L 0.5K 0.5. If it has to make 800 light bulbs, and the price of one unit of capital is 40 and the price of one unit of labor is 25, use the Lagrangian method to find the marginal cost of production.

a 125.9867
b. 31.6228
c. 1.667
d. 25.7371

2.

About the Lagrangian method, select the correct statement:

a. We can use it to solve firm's cost minimization problems, but not consumer's utility maximization problems.

b. We can use it to solve consumer's utility maximization problems, but not firm's cost minimization problems.

c. We cannot use it to solve any kind of optimization problem.

d. We can use it to solve both consumer's utility maximization and firm's cost minimization problems.

3. Firm Fiat Lux, a light bulb company, has the production function q = 2L ^0.5K ^0.5. If it has to make 800 light bulbs and price of one unit of capital is 40 and price of one unit of labor is 25, which is the Lagrangian function corresponding to this firm's cost minimization problem?

a. ℒ(L, K, λ) = 40K + 25L + λ(800 - 2L^0.5K^0.5 )

b. ℒ(L, K, λ) = 2L^0.5K^0.5 + λ(800 - 40K - 25L)

c. ℒ(L, K, λ) = 2L^0.5K^0.5 + λ(25298 - 40K - 25L)

d. None of the above

Expert Solution

Rahul Sunny answered 2 years ago

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