Consider a firm with production function: Q(L, K) = 400 + 12.3L – 0.8L² + 10.1K – 0.3K² + 0.2Lk, Where a firm employs K units of capital and L units of labour. Q describes the output which the firm can produce with these inputs. Assume that the firm is a price taker in the product market and in both factor markets. If P = 10 is the price of the commodity produced, r = 1 the interest rate and w = 3 the wage rate, then find maximum profit II(L, K) of this firm. Hint. The maximum profit II(L, K) of the firm with P – price of the commodity produced, r the interest rate and w – the wage rate П(L, К) 3D Р-Q(L, K) — rK — wL

Consider a firm with production function: Q(L, K) = 400 + 12.3L – 0.8L² + 10.1K – 0.3K² + 0.2Lk, Where a firm employs K units of capital and L units of labour. Q describes the output which the firm can produce with these inputs. Assume that the firm is a price taker in the product market and in both factor markets. If P = 10 is the price of the commodity produced, r = 1 the interest rate and w = 3 the wage rate, then find maximum profit II(L, K) of this firm. Hint. The maximum profit II(L, K) of the firm with P – price of the commodity produced, r the interest rate and w – the wage rate П(L, К) 3D Р-Q(L, K) — rK — wL

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter7: Production Economics

Section: Chapter Questions

Problem 6E

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