Suppose that the production function is q = F(L,K) = (KL)/ The output and input prices...

  

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Suppose that the production function is q = F(L,K) = (KL)/ The output and input prices are (p, w, r) = (1, 1, 1). Part a (5 marks) Derive the long-run cost function C(q). *Part b (7 marks) ** ** Solve the long-run profit maximization problem directly: max 1 * F(L, K) -1* L-1* K K,L and find the profit-maximizing output. [Hint: there are two first-order conditions, and you need to solve them jointly.] ** Part c (8 marks) As an alternative to Part b, solve for the profit-maximizing output using the long-run cost function you derived in Part a. Suppose that the production function is q = F(L,K) = (KL)/ The output and input prices are (p, w, r) = (1, 1, 1). Part a (5 marks) Derive the long-run cost function C(q). *Part b (7 marks) ** ** Solve the long-run profit maximization problem directly: max 1 * F(L, K) -1* L-1* K K,L and find the profit-maximizing output. [Hint: there are two first-order conditions, and you need to solve them jointly.] ** Part c (8 marks) As an alternative to Part b, solve for the profit-maximizing output using the long-run cost function you derived in Part a.

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