6. We have the production function, Q= f( K,L). Factor prices are r and w respectively and the product priCE Is p. (a) Write down the equations for profit function. Find the F.O.Cs and S.O.Cs for profit maximization and Interpret them. (b) Using the conditions in (a), show that output supply functlon has positive slope

6. We have the production function, Q= f( K,L). Factor prices are r and w respectively and the product priCE Is p. (a) Write down the equations for profit function. Find the F.O.Cs and S.O.Cs for profit maximization and Interpret them. (b) Using the conditions in (a), show that output supply functlon has positive slope

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter10: Cost Functions

Section: Chapter Questions

Problem 10.10P

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Course: Introduction to Economics - Labor Market This exercise is presented again. There are still no answers. Please, I need a real expert. Thank you You've been asked to solve an analytical example to illustrate concretely effects of minimum wage and labor income tax legislation on employment and, therefore, unemployment. For this, you have decided to study Labor Demand of a firm whose production function is given by: Y = A K1/3 L2/3For simplicity, you decide to assume that A = P = K = 1 , where A is factor productivity, P is price of the good sold by firm and K is amount of capital hired by firm. Recall, moreover, that optimal decision of any economic agent can be reduced to an equality between marginal revenue and marginal costs. In particular, firm will hire workers up to a point where marginal revenue (MR) of their labor equals marginal cost (MC). Given production function you have decided to use for analysis, marginal productivity (MPL) of labor is given by: MPL =…
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