Question: Consider the technology represented by y = (x_1)^0.4 (x_2)^0.6. The marginal products are MP_1 = 0.4/x_1 and MP_2 = 0.6/x_2. We now consider the problem of cost minimization.
Write the problem of cost minimization. Interpret.
What is the condition that the optimal choice of inputs has to satisfy? Interpret.
Obtain and interpret the cost-minimizing optimal demand functions for the two inputs.
Obtain and interpret the optimal cost function.