Consider a firm which is perfectly competitive in both product and labour markets. Suppose the product price is p3$1.21, wage is w=$11, and the production function is Q=L(32-L). For this production function MPL=32-2L A. Write down an expression for the firm's revenue minus cost (i.e. its profit). Note there is only one input here, you can consider that this firm does not use capital or that the production function given is for a fixed level of capital in the short run). B. Write the formula for this firm's MRP. Graphed with the conventional axes for economics, the slope of this curve is For this firm, the marginal cost of labour is equal to C. Write the conditions for this firm's profit-maximizing amount of labour. This firm will choose L*= and the corresponding maximum level of profit is equal to Compare the maximum profit to the profit at L*+1. D. When the firm employs L* units of labour, the marginal revenue product of labour is and the value marginal product of labour is

Consider a firm which is perfectly competitive in both product and labour markets. Suppose the product price is p3$1.21, wage is w=$11, and the production function is Q=L(32-L). For this production function MPL=32-2L A. Write down an expression for the firm's revenue minus cost (i.e. its profit). Note there is only one input here, you can consider that this firm does not use capital or that the production function given is for a fixed level of capital in the short run). B. Write the formula for this firm's MRP. Graphed with the conventional axes for economics, the slope of this curve is For this firm, the marginal cost of labour is equal to C. Write the conditions for this firm's profit-maximizing amount of labour. This firm will choose L= and the corresponding maximum level of profit is equal to Compare the maximum profit to the profit at L+1. D. When the firm employs L* units of labour, the marginal revenue product of labour is and the value marginal product of labour is

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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