Question: A firm production function is given by q(1,k) = 10.5.ko.5, where q is number of units of output produced, I the number of units of

 A firm production function is given by q(1,k) = 10.5.ko.5, where

A firm production function is given by q(1,k) = 10.5.ko.5, where q is number of units of output produced, I the number of units of labor input used and k the number of units of capital input used. This firm profit function is it = p.q(1,k) - w.I - v.k, where p is the price of output, w the wage rate of labor and v the rental rate of capital. In the short-run, k = 100. This firm hires its profit maximizing level of labor input. In the short-run, this firm demand equation for labor | is a factor a of (p/w)2: 1 = a (p/w)2. In this specific case, factor a is equal to [a]. (HINT: This is unconstrained profit maximization problem. Set your first order condition by taking the derivative of your profit function with respect to I equal to zero, assume the second order condition is satisfied, and solve for I. NOTE: Write your answer in number format, with 2 decimal places of precision level; do not write your answer as a fraction. Add a leading zero and trailing zeros when needed.)

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!