Meadow Farms produces cherries according to the production function Q = 36K²/³L¹/6. The market price for cherries is $5 per unit, the wage is $6 per unit, and the rental rate of capital is $30 per unit. (a) Write down the profit function for Meadow Farms in terms of capital and labor. (b) Find the profit-maximizing combination of inputs that Meadow Farms will use. (c) Verify that the profit-maximizing combination of inputs that Meadow Farms uses minimizes its costs.

Meadow Farms produces cherries according to the production function Q = 36K²/³L¹/6. The market price for cherries is $5 per unit, the wage is $6 per unit, and the rental rate of capital is $30 per unit. (a) Write down the profit function for Meadow Farms in terms of capital and labor. (b) Find the profit-maximizing combination of inputs that Meadow Farms will use. (c) Verify that the profit-maximizing combination of inputs that Meadow Farms uses minimizes its costs.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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