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Question 6. (20 marks) Let y = F(K, L) = AK1/2 [1/3 be a firm's produc- tion function, A = 8. It receives p= 1/4
Question 6. (20 marks) Let y = F(K, L) = AK1/2 [1/3 be a firm's produc- tion function, A = 8. It receives p= 1/4 for each unit it produces. It pays labour at the rate w = 2 per unit and rents capital at a rate r = unit. - 1/2 per (a) Write down the firm's profit function, (K, L). (b) Find the profit maximizing levels of capital and labour, K* and L*. (c) Determine if K* and L* are true maximizers. Question 6. (20 marks) Let y = F(K, L) = AK1/2 [1/3 be a firm's produc- tion function, A = 8. It receives p= 1/4 for each unit it produces. It pays labour at the rate w = 2 per unit and rents capital at a rate r = unit. - 1/2 per (a) Write down the firm's profit function, (K, L). (b) Find the profit maximizing levels of capital and labour, K* and L*. (c) Determine if K* and L* are true maximizers
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