A manager hires labour and rents capital equipment in a very competitive market. Currently the wage rate is GH¢2 per hour and capital is rented at GH¢5 per hour, the unit price of the
product is GH¢0.25 and total cost is 1000. Suppose the firm’s production function is as
follows:
� = 14�*.,�*., + 10
i. What is the amount of labour and capital the firm should employ in order to maximize
output? [Hint: Maximise the product function subject to the cost constraint]
ii. What is the maximum profit?