A firm operates using the production technology
Question # 00542204
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Updated on: 06/08/2017 02:12 AM Due on: 06/08/2017
5. A firm operates using the production technology f(L,K) = ?(LK). The wage rate is w = 1, the rental rate of capital is r = 3, and the price of the output is p = 10.
5(a). (23 points) Show that the firm’s short-run demand for labor as a function of the fixed level of capital K > 0 satisfies
L(K) = 25K.
(b). (20 points) What is the effect of a marginal change in K on the profit of the firm?
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Rating:
5/
Solution: A firm operates using the production technology