Consider the production function q(L, K) = LK. Exercise 1 a) Derive the expressions for the input demands. [Hint: Solve the firm's CMP without assuming a specific output level, q, or specific values for input prices w and r. You will find that the optimal workers hired, L, is not a number, but a function of q, w, and r. This is what we refer as the firm's "input demand for labor." A similar argument applies to the optimal amount of capital that the firm acquires, which we refer as the firm's "input demand for capital"] b) Find and simplify the expression for the minimized total cost curve for this firm.

Consider the production function q(L, K) = LK. Exercise 1 a) Derive the expressions for the input demands. [Hint: Solve the firm's CMP without assuming a specific output level, q, or specific values for input prices w and r. You will find that the optimal workers hired, L, is not a number, but a function of q, w, and r. This is what we refer as the firm's "input demand for labor." A similar argument applies to the optimal amount of capital that the firm acquires, which we refer as the firm's "input demand for capital"] b) Find and simplify the expression for the minimized total cost curve for this firm.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter10: Cost Functions

Section: Chapter Questions

Problem 10.12P

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