Y5

QUESTION 1 Consider the following production functions Ouput = K -731-15 Assuming the cost of capital is 3 dollars per unit of capital used and the cost of labor is 1, what would be the profit- maximizing amount of labor to use if the firm is facing a downward sloping demand curve that is defined as Price =20- Q Where O is the output produced by the firm and p is the price. QUESTION 2 What is the price elasticity of demand at the profit- maximizing level of output (hint: you will have to change the quantity just a tiny amount]? So there is no confusion, make sure to take the absolute value of your answer. QUESTION 3 How does the level of production observed when the firm faces this downward-sloping demand curve compare with the output that would be observed under perfect competition in the LONG RUN? O Relatively lower production under perfect composition O Relatively higher production under perfect competition QUESTION 4 How does the amount of labor used when the firm faces the downward sloping demand curve compare with the labor that would be used under perfect competition in the LONG RUN? O Relatively lower labor is used under perfect competition O Relatively more labor is used under perfect competition