A firm that only employs labor (L) has the following production function: Q = 20L - L2
Question:
Let the price of output be one and the price of labor w.
a. Write out the profit function for this firm as a function of labor, L.
b. What is the necessary first-order condition for the firm to maximize profit for L>0?
c. Express the profit maximizing amount of labor as a function of the wage.
d. How would firm's optimal L change if the wage increases? Use calculus to figure this.
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Step by Step Answer:
a Profit Total revenue less total costs PQ wL ieProfit ...View the full answer
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