Suppose that the quantity of plastic bottles produced (q) takes place in two locations. Capital inputs cannot change and changes in production use only labour as an input. The production function in location 1 is given byand in the other location by a. If a single firm produces bottles in both locations, then it will obviously want to get as large an output as possible for a given labour input. How should the firm allocate labour between the two locations to do so? Explain precisely the relationship between l1 and l2. b. Assuming that the firm operates in the efficient manner described in part (a), how does total output (q) depend on the total amount of labour employed (l)?
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