Assume the Cobb-Douglas production function is Q= L ^0.75 K^0.5 and if price of labor per day is 5 birr and price of capital per day is 10 birr, and if total outlay (cost budget) per day is 400 birr, A.Find L and K that maximize out put B.What is the maximum out put the equilibrium L* and K*

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Isocost and Isoprofit Curve Analysis

An isocost curve in the production theory that is a crucial part of economics depicts different combinations of factor inputs at a given market cost. In other words, this shows all the combinations of production factors that cost the same for the firm to employ. Usually, this can be depicted as a downward sloping straight line when the firms act as the price-takers in the factor markets. The slope of this mainly depicts the relative prices of different production factors.