Suppose in the long-rung the production function of a competitive firm is Q=f(L,K)= L²/³K¹/4, where L is the amount of labor and K is the amount of capital. The cost per unit of labor is w and the cost of capital is r, which is the interest rate. The price per unit of output is p. a. Write down the profit as a function of K and L. b. Find the marginal products of K and L: MPK and MPL C. Now multiply MPK and MPL by the output price, p, to get the marginal revenues of capital and labor, respectively.
Suppose in the long-rung the production function of a competitive firm is Q=f(L,K)= L²/³K¹/4, where L is the amount of labor and K is the amount of capital. The cost per unit of labor is w and the cost of capital is r, which is the interest rate. The price per unit of output is p. a. Write down the profit as a function of K and L. b. Find the marginal products of K and L: MPK and MPL C. Now multiply MPK and MPL by the output price, p, to get the marginal revenues of capital and labor, respectively.
Chapter11: Profit Maximization
Section: Chapter Questions
Problem 11.9P
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