FInd the profit maximizing levels of K and L as functions of r,w, and p. b) Suppose that r = w= $1 and p =$4 . What is the profit maximizing level of output,y?
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Consider two firms that produce a single output good,y, using two inputs :Capital, K , and labor, L, the prices of each unit of capital and labor are r and w,respectively. The output good y sells for $p per unit.
Firm A's production function is y = fa(K,L) = K1/4L1/4. The profit function is equals to : K1/4L1/4 - rK -wL.
a) FInd the profit maximizing levels of K and L as functions of r,w, and p.
b) Suppose that r = w= $1 and p =$4 . What is the profit maximizing level of output,y?
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