Problem #1 1. Consider two firms that produce a single output good, y, using two inputs: Capital, K, and labor, L. the prices of each unit of capital and labor are r and w, respectively. The output good y sells for $p per unit. Firm A's production function is y = = Kli4 1-114. The profit function is thus: = KIM LIM- rK -WL a. Find the profit maximizing levels of K and L as functions of r, w, and p. b. Suppose that r = w = $1 and p = $4. What is the profit maximizing level of output, y ?