2. Consider Q(L,K)= KL. Suppose that the unit output price is $12, and the unit labor cost and the unit capital cost are $0.6 and $1.2, respectively. a. Write-out the firm's profit function. b. Find K* and L*. c. Verify that the solution yields maximum profit. d Find 7*

2. Consider Q(L,K)= KL. Suppose that the unit output price is $12, and the unit labor cost and the unit capital cost are $0.6 and $1.2, respectively. a. Write-out the firm's profit function. b. Find K* and L. c. Verify that the solution yields maximum profit. d Find 7

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter7: Production And Cost In The Firm

Section: Chapter Questions

Problem 19PAE

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Concept explainers

Short-Run Costs and Long-Run Costs

Cost of short-run and the long-run is an economic term that describes the cost involved in the production of goods in a firm in the short as well as long period.

Question

2.
Consider Q(L,K) = KL. Suppose that the unit output price is $12, and the unit labor
cost and the unit capital cost are $0.6 and $1.2, respectively.
a. Write-out the firm's profit function.
b. Find K* and L*.
c.
Verify that the solution yields maximum profit.
d. Find 7*.

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