Question: Firms often face the problem of allocating an input in fixed supply among different products. Find the optimal crude oil allocation for the following example if the profit associated with square foot of fiber is cut to $0.375, while the profit associated with per gallon of gasoline stayed at $0.50.

What is gasoline marginal profit, given gasoline production function of

QG = 72MG – 1.5 MG²,

What is fiber marginal profit, given fiber production function of

QF = 80MF – 2MF²,

Determine the maximize profit.

Determine total input availability.

To maximize the profit by figuring out the optimal allocation of resources, we need to find the point where marginal profits per unit of input for each product are identical i.e., Mπ_G = Mπ_F