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.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter16: Labor Markets

Section: Chapter Questions

Problem 16.7P

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