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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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