A Production Model predicts that the total output T is given in terms of the amounts...

A Production Model predicts that the total output T is given in terms of the amounts of labor x and capital investment y according to the formula:
T = x p y q
for some constants p , q > 0 . Subject to a cost constraint:
a x + b y = 1 ,
what x and y give the most total output T? What is the most output?

Expert Solution

We have used the lagrange Multiplier Method to find the value of x and y which will give us the maximum output and then the value of the maximum output is to be found out. The Step by step explanatory solution provided below.

milcah answered 2 years ago

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