Problem: Suppose a firm assumes the following production function:
Log Q=2 + .8 log K + .1 log L
1) Currently, the firm hires 10,000 workers and employs 50 units of capital. The "wage" of capital and labor are $500 and $800 respectively, what would you suggest would be the firm's mix of labor and capital if it produces 2,000,000 units?
2) Is this an example of a Cobb-Douglas Production function?
3) Would you suggest this firm merge with similar firms? Explain.