Jess owns a firm that uses labour (L) and capital (C) to sell widgets (X), according to the following production function: X = F(L,C) = ln(L) + ln(C) Jesse buys her factors and sells her output in perfectly competitive markets. The market prices for L, C and W are a, r and p, respectively. What is the firm’s profit function. What is the firm's marginal product of labour , marginal product of capital and marginal rate of technical substitution Does the firm exhibit a diminishing marginal product of capital?
Jess owns a firm that uses labour (L) and capital (C) to sell widgets (X), according to the following production function: X = F(L,C) = ln(L) + ln(C) Jesse buys her factors and sells her output in perfectly competitive markets. The market prices for L, C and W are a, r and p, respectively. What is the firm’s profit function. What is the firm's marginal product of labour , marginal product of capital and marginal rate of technical substitution Does the firm exhibit a diminishing marginal product of capital?
Chapter11: Profit Maximization
Section: Chapter Questions
Problem 11.3P
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Jess owns a firm that uses labour (L) and capital (C) to sell widgets (X), according to the following production function:
X = F(L,C) = ln(L) + ln(C)
Jesse buys her factors and sells her output in
- What is the firm’s profit function.
- What is the firm's marginal product of labour , marginal product of capital and
marginal rate of technical substitution - Does the firm exhibit a diminishing marginal product of capital?
- What is the firms demand functions for labour and capital.
- Say the central bank decides to increase interest rates, causing ? to go up. What effect will this have on the firm’s use of L and C? What effect will it have on output (X) and profits?
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