If this firm is a price-taker in a market with many firms, what is the profit maximizing amount q* this firm will produce? We are considering here the case where the firm can choose both capital and labor. The market price is P, the input prices are v = 2 and w = 1. (Hint: derive the cost function and replace the input prices before deriving q*.) p3 512 p³ 64 p² 16 P 16 = P³ * 0.001953 = P3 * 0.015625 = P² * 0.0625 = P * 0.0625

If this firm is a price-taker in a market with many firms, what is the profit maximizing amount q* this firm will produce? We are considering here the case where the firm can choose both capital and labor. The market price is P, the input prices are v = 2 and w = 1. (Hint: derive the cost function and replace the input prices before deriving q.) p3 512 p³ 64 p² 16 P 16 = P³ 0.001953 = P3 * 0.015625 = P² * 0.0625 = P * 0.0625

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

100%

If this firm is a price-taker in a market with many firms, what is the profit maximizing amount q* this
firm will produce? We are considering here the case where the firm can choose both capital and
labor. The market price is P, the input prices are v = 2 and w = = 1. (Hint: derive the cost function
and replace the input prices before deriving q*.)
O
O
-
p³
512
p³
64
p²
16
P
16
= P3 * 0.001953
= P3 * 0.015625
-
=
: P² * 0.0625
= P * 0.0625

A firm faces a production function with inputs capital (K) and labor (L):
F(K, L) = K¹/² L¹/4
The amount of capital used for production is determined at the beginning of the year.
The prices of K and L are v and w respectively.

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