2. Assume that the production of output is given by Q(K,L)=K02106, where K = quantity of capital and L= quantity of labor (number of workers). Let P, r, and w be the price of output, rental rate of capital, and wage rate, respectively. Assume P = 10, r = 2, and w = 8. (a) Find the short-run and long-run demands for labor. (b) Are the short-run and long-run demand curves for labor downward sloping? Explain. (c) Find w OL for both the short run and long run demands for labor. Interpret the results. Low (d) Suppose the government offers a 50% subsidy on capital expenditures. Find the short- run and long-run demands for labor. Interpret the results.
2. Assume that the production of output is given by Q(K,L)=K02106, where K = quantity of capital and L= quantity of labor (number of workers). Let P, r, and w be the price of output, rental rate of capital, and wage rate, respectively. Assume P = 10, r = 2, and w = 8. (a) Find the short-run and long-run demands for labor. (b) Are the short-run and long-run demand curves for labor downward sloping? Explain. (c) Find w OL for both the short run and long run demands for labor. Interpret the results. Low (d) Suppose the government offers a 50% subsidy on capital expenditures. Find the short- run and long-run demands for labor. Interpret the results.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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