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Asked Mar 19, 2019
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0(L, K) = 50K2Lī, where K is capital and L is labour. The marginal products are
MPL 5KLi, and MP 50-iLi.
Assume that a haircut has the price, p, that the cost of purchasing labour
is wi and the cost of purchasing capital is r. We will also assume that in
the short run that capital is held constant. What is the equation for a short
run isoprofit line?
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0(L, K) = 50K2Lī, where K is capital and L is labour. The marginal products are MPL 5KLi, and MP 50-iLi. Assume that a haircut has the price, p, that the cost of purchasing labour is wi and the cost of purchasing capital is r. We will also assume that in the short run that capital is held constant. What is the equation for a short run isoprofit line?

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Expert Answer

Step 1

Production technologies or production function defines a relationship between the output and inputs. We are given the production function as follows.

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Step 2

We are given the cost of purchasing capital=r

And, the cost of purchasing labor=w.

Thus, to hire L units of labor and K units of capital, the cost would be,

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Step 3

Profit is defined as total revenue net of total costs. Now, we write the profit function (π) as per the given infor...

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