A competitive firm employs labor and capital to produce its product according to L03K0.5. The market price is $100, the market wage is $10, and the the production function y = rental rate for capital is $15. a. What is the marginal product of labor? b. Find the profit-maximizing levels of Land K. c. Show that profit is indeed maximized at L* and K* (i.e. Use the Hessian to demonstrate that the relevant second-order condition holds).
A competitive firm employs labor and capital to produce its product according to L03K0.5. The market price is $100, the market wage is $10, and the the production function y = rental rate for capital is $15. a. What is the marginal product of labor? b. Find the profit-maximizing levels of Land K. c. Show that profit is indeed maximized at L* and K* (i.e. Use the Hessian to demonstrate that the relevant second-order condition holds).
Chapter11: The Firm: Production And Costs
Section: Chapter Questions
Problem 15P
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Transcribed Image Text:A competitive firm employs labor and capital to produce its product according to
L03K0.5. The market price is $100, the market wage is $10, and the
the production function y =
rental rate for capital is $15.
a. What is the marginal product of labor?
b. Find the profit-maximizing levels of Land K.
c. Show that profit is indeed maximized at L* and K* (i.e. Use the Hessian to
demonstrate that the relevant second-order condition holds).
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