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) = K4 L/4. The profit function is thus: DA(K,L) = K4 L14 – rK -wL a. Find the profit maximizing levels of K and L as functions of r. w. and p.

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) = K4 L/4. The profit function is thus: DA(K,L) = K4 L14 – rK -wL a. Find the profit maximizing levels of K and L as functions of r. w. and p.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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) = K4 L14.
The profit function is thus:
DA(K,L) = K4 L'1/4 – rK -wL
a. Find the profit maximizing levels of K and L as
functions of r, w, and p.

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