Question: 1. Consider the following production function: Y=K1L, where Y is production, K is capital, L is labor, and (0,1) is a parameter. Let w denote

1. Consider the following production function: Y=K1L, where Y is production,

1. Consider the following production function: Y=K1L, where Y is production, K is capital, L is labor, and (0,1) is a parameter. Let w denote the wage rate and r denote the rental rate of capital. (a) Derive K and L by setting up and solving the profit maximization problem of the firm. Show every step of all calculations. (b) What is the expression for rK ? Similarly, what is the expression for wL ? Comment on your results. Show every step of all calculations. 1. Consider the following production function: Y=K1L, where Y is production, K is capital, L is labor, and (0,1) is a parameter. Let w denote the wage rate and r denote the rental rate of capital. (a) Derive K and L by setting up and solving the profit maximization problem of the firm. Show every step of all calculations. (b) What is the expression for rK ? Similarly, what is the expression for wL ? Comment on your results. Show every step of all calculations

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