Posted by jon on .
Suppose the economy consists of two types of firms: Type A firms which produce output using a technology Qa=Min(K,1/2L) and Type B firms which produce output using the technology Qb=Min(K,L). The economy has exactly forty units of labor and thirty units of capital. If we assume that all resources are fully employed, how much of good A will be produced? HOw much of good B?
I get firm A using 20 L and 10 K, firm B using 20 L and 20 K.