1. Consider two firms that produce a single output good, y, using two inputs: Capital, K, and labor, L. the prices of each unit of capital and labor are r and w, respectively. The output good y sells for $p per unit. Firm A's production function is y = fA(K,L) = K/4 L4. The profit function is thus: Da(K,L) = K4 L/4 – rK -wL

1. Consider two firms that produce a single output good, y, using two inputs: Capital, K, and labor, L. the prices of each unit of capital and labor are r and w, respectively. The output good y sells for $p per unit. Firm A's production function is y = fA(K,L) = K/4 L4. The profit function is thus: Da(K,L) = K4 L/4 – rK -wL

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Suppose that r= w=$1 and p= $4. What is the profit maximizing level of output y?

1. Consider two firms that produce a single output good,
y, using two inputs: Capital, K, and labor, L. the
prices of each unit of capital and labor are r and w,
respectively. The output good y sells for $p per unit.
Firm A's production function is y = fA(K,L) = K/4 L14.
The profit function is thus:
DA(K,L) = K4 L1/4 – rK -wL

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