Question: Consider a firm that maximizes profits using two inputs, capital K and labor L, subject to a rental price r and wage rate w.

Consider a firm that maximizes profits using two inputs, capital K and labor L, subject to a rental price r and wage rate w. It sells its products in a competitive market at price p. Solve for labor demand in terms of parameters w,r,p:: 1. If the production function is q = f(K, L) = KL. 2. If the production function is Cobb-Douglas: q = f(K, L) = K/3 [2/3 3. If the production function is linear: q = f(K, L) = K+L. (Hint: capital and labor are perfect substitutes.)

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