5. Suppose the production function is given by f(E, K) = E'/³K²/3. The hourly wage rate is$2 and the price for a unit of capital is $32. The output level is ĝ = 144 and the price of theoutput is $30.(a) Write a firm's CMIN problem.(b) Impose FONC to find MP(E) = w and MP(K) = r.%3D (f) If the price is $30, how much will this firm's profit or loss be? Should the firm stay inbusiness or exit?

Every firm wants to earn maximum profit, to earn maximum profit firms minimize the cost of producing…

5. Suppose the production function is given by f(E, K) $2 and the price for a unit of capital is $32. The output level is q = 144 and the price o output is $30. The hourly wage ra (a) Write a firm's CMIN problem. (b) Impose FONC to find MP(E) = w and MP(K) =r. %3D

5. Suppose the production function is given by f(E, K) $2 and the price for a unit of capital is $32. The output level is q = 144 and the price o output is $30. The hourly wage ra (a) Write a firm's CMIN problem. (b) Impose FONC to find MP(E) = w and MP(K) =r. %3D

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.9P

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Question

5. Suppose the production function is given by f(E, K) = E'/³K²/3. The hourly wage rate is
$2 and the price for a unit of capital is $32. The output level is ĝ = 144 and the price of the
output is $30.
(a) Write a firm's CMIN problem.
(b) Impose FONC to find MP(E) = w and MP(K) = r.
%3D

(f) If the price is $30, how much will this firm's profit or loss be? Should the firm stay in
business or exit?

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