Question
A firm's short-run production function is displayed in the figure below. The firm's variable input is labor. Assume that when 4 units of labor are
A firm's short-run production function is displayed in the figure below. The firm's variable input is labor. Assume that when 4 units of labor are being used, the slope of the short-run production function reaches its maximum value of 7 (?q/?L=7whenL=4). If 6 units of labor are being used, the slope of the production function is 3 (?q/?L=3 whenL=6). Finally, the slope of the production function is equal to 5 when five units of labor are used (?q/?L=5whenL=5). Suppose the firm has to pay a wage of $15 (w=15) for each unit of labor. If the firm can sell each unit of output for a price of $3 (p=3), what is the firm's profit-maximizing level of production (q) in the short-run?
Profit maximizingq = ?
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