=+13.9*† Business and Policy Application: Fixed Amount of Land for Oil Drilling: Suppose that your oil company is part of a competitive industry and is using three rather than two inputs—labor ,, capital k, and land L—to produce barrels of crude oil denoted by x. Suppose that the government, due to environmental concerns, has limited the amount of land available for oil drilling, and suppose that it has assigned each oil company L acres of such land. Assume throughout that oil sells at a market price p; labor, at a market wage of w; and capital, at a rental rate r, and these prices do not change as government policy changes.

A. Assume throughout that the production technology is homothetic and has constant returns to scale.