Assume a firm has the following production function:q(L, K) = L¹/2. K¹/2Additionally, assume that, in the short-run, the firm has already invested in 4 units of capital (K = 4).4), what is the firm's profit maximizing level of output (q)A) If the firm must pay a wage of $4 for each unit of labor (w =if they can sell each unit of output for $4 (p = 4)?B) How much would the firm's profit increase in the short-run if the wage fell to $2 (w = 2) and the price remained at $4(p 4)?

We have to satisfy first order condition for profit maximization

Assume a firm has the following production function: q(L, K) = L¹1/2. K¹/2 Additionally, assume that, in the short-run, the firm has already invested in 4 units of capital (K = 4). A) If the firm must pay a wage of $4 for each unit of labor (w = 4), what is the firm's profit maximizing level of output (q) if they can sell each unit of output for $4 (p = 4)? B) How much would the firm's profit increase in the short-run if the wage fell to $2 (w = 2) and the price remained at $4 (p = 4)?

Assume a firm has the following production function: q(L, K) = L¹1/2. K¹/2 Additionally, assume that, in the short-run, the firm has already invested in 4 units of capital (K = 4). A) If the firm must pay a wage of $4 for each unit of labor (w = 4), what is the firm's profit maximizing level of output (q) if they can sell each unit of output for $4 (p = 4)? B) How much would the firm's profit increase in the short-run if the wage fell to $2 (w = 2) and the price remained at $4 (p = 4)?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter9: Production Functions

Section: Chapter Questions

Problem 9.1P

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