A competitive, profit-maximizing firm uses two inputs labor (2) and capital (K). Its production function is given by f (L, K) = 3L2 + 7K2. Its output sells for $4 per unit. The price of labor is $6 per hour. The price of output rises to $8 per unit but factor prices do not change. (a) It will increase its hiring of labor by 4 hours. (b) It will increase its hiring of labor by 2 hours. (c) We need to know the price of capital to be able to determine the change in demand for labor. (d) It will increase its hiring of labor by 3 hours. (e) None of the above.
A competitive, profit-maximizing firm uses two inputs labor (2) and capital (K). Its production function is given by f (L, K) = 3L2 + 7K2. Its output sells for $4 per unit. The price of labor is $6 per hour. The price of output rises to $8 per unit but factor prices do not change. (a) It will increase its hiring of labor by 4 hours. (b) It will increase its hiring of labor by 2 hours. (c) We need to know the price of capital to be able to determine the change in demand for labor. (d) It will increase its hiring of labor by 3 hours. (e) None of the above.
Microeconomics A Contemporary Intro
10th Edition
ISBN:9781285635101
Author:MCEACHERN
Publisher:MCEACHERN
Chapter7: Production And Cost In The Firm
Section: Chapter Questions
Problem 19PAE
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