Consider a production function Y KªL1-a. a) What is the marginal product of capital? Write down the formula and show your working. b) Write down the profit maximization problem for the firm.
Consider a production function Y KªL1-a. a) What is the marginal product of capital? Write down the formula and show your working. b) Write down the profit maximization problem for the firm.
Chapter6: Proudction Costs
Section: Chapter Questions
Problem 3SQP
Related questions
Question
Transcribed Image Text:Consider a production function Y = KªL1-«.
a) What is the marginal product of capital? Write down the formula and show your working.
b) Write down the profit maximization problem for the firm.
Transcribed Image Text:c) Use your previous answer to (a) and (b) to write down the labor demand
curve which relates the quantity of labor the firm demands to the price of
labor (i.e. the wage).
d) If the quantity of labor supplied increases by 1%, what is the increase in
the firm's output? State your answer in terms of expenditure shares.
e) If the quantity of labor supplied increases by 1%, what is the change in
the real wages of workers?
f) If this production function is to represent the US economy, what is a
reasonable value to choose for a? Why?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Economics (MindTap Course List)
Economics
ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning
