Consider a firm that produces output using a Cobb-Douglas combination of capital and labog Y= KL,0...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider a firm that produces output using a Cobb-Douglas combination of capital and labog Y= KL¹,0<a<1. Suppose that the firm's price is fixed in the short run; thus it takes both the price of its product, P, and the quantity, Y, as given. Input markets are competitive; thus the firm takes the wage, W, and the rental price of capital, rx. as given. (a) What is the firm's choice of L given P, Y, W. and K? (b) Given this choice of L, what are profits as a function of P, Y. W. and K? (c) Find the first-order condition for the profit-maximizing choice of K. Is the second-order condition satisfied? (d) Solve the first-order condition in part (c) for K as a function of P. Y. W. and How, if at all, do changes in each of these variables affect K? Consider a firm that produces output using a Cobb-Douglas combination of capital and labog Y= KL¹,0<a<1. Suppose that the firm's price is fixed in the short run; thus it takes both the price of its product, P, and the quantity, Y, as given. Input markets are competitive; thus the firm takes the wage, W, and the rental price of capital, rx. as given. (a) What is the firm's choice of L given P, Y, W. and K? (b) Given this choice of L, what are profits as a function of P, Y. W. and K? (c) Find the first-order condition for the profit-maximizing choice of K. Is the second-order condition satisfied? (d) Solve the first-order condition in part (c) for K as a function of P. Y. W. and How, if at all, do changes in each of these variables affect K?
Expert Answer:
Answer rating: 100% (QA)
The image shows a question from an economics or microeconomics textbook which presents a problem for a firm producing output using a CobbDouglas produ... View the full answer
Related Book For
Posted Date:
Students also viewed these economics questions
-
Consider a firm that produces according to the production function: Q = KL where Q is the firm's output and K and L are the quantities of capital and labor that it employs. With this production...
-
Suppose that the person with the above utility function is struck by lightning. He survives, except now his utility function is u = 1 log(x1 1) + 2 log(x2 2). Will his consumption decisions change...
-
If North American wholesalers buy roses at the lowest possible price, how many do they buy from local growers and how many do they import?
-
What meta goals might you have, and what would be their relative importance to you, in purchasing (or renting or giving to) the options in Question 23? Question 23 a. Adopting a pet from a shelter b....
-
Mr. Black and Mr. Red operate accounting practices as sole practitioners. They wish to form a partnership in which Mr. Black will hold a 60% share and Mr. Red a 40% share. The relevant financial data...
-
If rp is positive in Equation 14.9, then foreign assets are perceived as being more risky than domestic counterparts. In that case, according to Equation 14.9, what will happen to the exchange rate...
-
Tru Developers, Inc. sells plots of land for industrial development. Tru recognizes income for financial reporting purposes in the year it sells the plots. For some of the plots sold this year, Tru...
-
A bond is selling at par with the Macaulay duration of 11.2 years and the modified duration of 10.6 years. The convexity of the bond is 196. According to the duration rule, a 2% decrease in yield...
-
Plot the data in Problem 1 on a column chart in which good defensive games are highlighted in green, bad games in red, and other games in orange. Data from in problem 1 The Indiana University...
-
An object of 100N weight falls by gravity a vertical distance of 5m, when it is suddenly stopped by a collar at the end of a vertical rod of length 10m and diameter 20 mm. The top of the bar is...
-
Kalan purchased four new tires at Walmart for $1,000 using there "no payments for 12 months plan." About a year later, before Kalan had made any payments, the tires were not performing as well as...
-
During Year 2, Walton Manufacturing Company incurred $60,000,000 of research and development (R&D) costs to create a long-life battery to use in computers. In accordance with FASB standards, the...
-
Question 1 of 2 Mary, a Conestoga college graduate from business fundamental program, joined as a Store Coordinator at Echo Sports Equipment (ESE) store, located in Kitchener. While studying, she...
-
16) Write the correct order of species abundance for primary succession. 17) Mosses, Lichens, Herbs, and Weeds are members of what stage of primary succession? 18) Pines, Spruces, Immature Oaks are...
-
10year equity graph. Book value the same Equity it's just on a per share basis. Your 10-year annualized or compounded growth is 13.98. Questions: Find in the balance sheet to compute book value in...
-
An asset acquired on January 1, 2016, for $15,500 with an estimated 10-year life and no residual value is being depreciated in an equipment group asset account that has an average service life of...
-
Revol Industries manufactures plastic bottles for the food industry. On average, Revol pays $76 per ton for its plastics. Revol's waste-disposal company has increased its waste-disposal charge to $57...
-
Suppose the U.S. supply and demand curves for automobiles cross at a price of $15,000 but (identical) automobiles can be purchased from abroad for $10,000. Now suppose the government offers U.S....
-
True or False: When price equals marginal cost, profit equals zero.
-
The problems in this problem set refer to the following game matrices. In each case, Jack chooses left or right and Jill chooses up or down. The outcomes show how many buckets of water are rewarded....
-
Transactions for Thorn Consulting for the month of June are presented below. Identify the accounts to be debited and credited for each transaction. June 1 2 Oleg Thorn invests 5,000 cash in a small...
-
Emily Stansbury is a licensed dentist. During the first month of the operation of her business, the following events and transactions occurred. Emily uses the following chart of accounts: No. 101...
-
Indicate how a journal is used in the recording process.
Study smarter with the SolutionInn App