Consider a firm with the following production technology q=k^1/2 l^1/2 . The market price Of the firm"s product is p=1 and rental rates of capital and labor are given, respectively, by r and w.
1. Find the MRTS. How do you interpret this number?
2. Assuming that r=w=2, find the optimality condition for the firm's problem
3. Now find the optimal amount of capital and labor needed to produce 4 units of output.