Question

Consider a firm with production function: Q(L, K) = 400 + 12.3L - 0.8L^2 + 10.1K - 0.3K^2 + 0.2LK, Where a firm employs K units of capital and L units of labour. Q describes the output which the firm can produce with these inputs. Assume that the firm is a price taker in the product market and in both factor markets. If P = 10 is the price of the commodity produced, r = 1 the interest rate and w = 3 the wage rate, then find maximum profit ?(L, K) of this firm. Hint. The maximum profit ?(L, K) of the firm with P – price of the commodity produced, r – the interest rate and w – the wage rate ?(L, K) = P · Q(L, K) – rK – wL

          Consider a firm with production function:

Q(L, K) = 400 + 12.3L - 0.8L^2 + 10.1K - 0.3K^2 + 0.2LK,

Where a firm employs K units of capital and L units of labour. Q describes the output which the firm can produce with these inputs. Assume that the firm is a price taker in the product market and in both factor markets. If P = 10 is the price of the commodity produced, r = 1 the interest rate and w = 3 the wage rate, then find maximum profit ?(L, K) of this firm.

Hint. The maximum profit ?(L, K) of the firm with P – price of the commodity produced, r – the interest rate and w – the wage rate
?(L, K) = P · Q(L, K) – rK – wL

Consider a firm with production function:

Q(L, K) = 400 + 12.3L - 0.8L^2 + 10.1K - 0.3K^2 + 0.2LK,

Where a firm employs K units of capital and L units of labour. Q describes the output which the firm can produce with these inputs. Assume that the firm is a price taker in the product market and in both factor markets. If P = 10 is the price of the commodity produced, r = 1 the interest rate and w = 3 the wage rate, then find maximum profit ?(L, K) of this firm.

Hint. The maximum profit ?(L, K) of the firm with P – price of the commodity produced, r – the interest rate and w – the wage rate
?(L, K) = P · Q(L, K) – rK – wL

Added by Kevin C.

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