Question: 1. Make up your own constrained optimization problem for an objective function with two independent variables and solve it using the substitution method.
2. A firm faces the production function Q = 2K0.2L0.6 and can buy L at £240 a unit and K at £4 a unit.
(a) If it has a budget of £16,000 what combination of K and L should it use to maximize output?
(b) If it is given a target output of 40 units of Q what combination of K and L should it use to minimize the cost of this output?