A competitive firm produces its output, y according to the production function: Y = F(K,L), where K and L are capital and labour inputs. The output price is p, and the prices of K and L are s and w, respectively. Assume that K is fixed in the short run. In addition, assume that the production function exhibits constant returns to scale in K and L. Define the firm's short-run profit function and show that the firm's short-run supply function is linear in K.
A competitive firm produces its output, y according to the production function: Y = F(K,L), where K and L are capital and labour inputs. The output price is p, and the prices of K and L are s and w, respectively. Assume that K is fixed in the short run. In addition, assume that the production function exhibits constant returns to scale in K and L. Define the firm's short-run profit function and show that the firm's short-run supply function is linear in K.
Chapter1: Making Economics Decisions
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
Transcribed Image Text:A competitive firm produces its output, y
according to the production function: Y =
F(K,L), where K and L are capital and labour
inputs. The output price is p, and the prices of
K and L are s and w, respectively. Assume that
K is fixed in the short run. In addition, assume
that the production function exhibits constant
returns to scale in K and L. Define the firm's
short-run profit function and show that the
firm's short-run supply function is linear in K.
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