. There are 2 firms (i= 1,2) in an economy, which use capital only to produce final output.The production function for Firm i takes the following form:-1/2Y; = A;K;1²(1)Assume that A1 = 1 and A2 = 2, and there are 5 units of capital in this economy. What isthe optimal allocation of capital between these two firms?

Introduction There are two firms in the economy. The economy use only capital to produce final…

There are 2 firms (i = 1,2) in an economy, which use capital only to produce final output. The production function for Firm i takes the following form: Y; = A¿K}/2 (1) Assume that Aı = 1 and A2 = 2, and there are 5 units of capital in this economy. What is the optimal allocation of capital between these two firms?

There are 2 firms (i = 1,2) in an economy, which use capital only to produce final output. The production function for Firm i takes the following form: Y; = A¿K}/2 (1) Assume that Aı = 1 and A2 = 2, and there are 5 units of capital in this economy. What is the optimal allocation of capital between these two firms?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.1P

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