Suppose the hourly wage is $2 and the price of each unit of capital is $5. The price of output is constant at $20 per unit. The production function is: 1, K f(E, K) 2 E where K is the capital stock and E is the level of employment. If the current capital stock is fixed at 400 units: (a) How much labor should the firm employ in the short run? (b) How much profit, will the firm earn?

Suppose the hourly wage is $2 and the price of each unit of capital is $5. The price of output is constant at $20 per unit. The production function is: 1, K f(E, K) 2 E where K is the capital stock and E is the level of employment. If the current capital stock is fixed at 400 units: (a) How much labor should the firm employ in the short run? (b) How much profit, will the firm earn?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.9P

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