Suppose a price-taking profit-maximising firm produces output in the short run using only labour as a variable factor. Output (Q) and labour input (L) are related by the equation: Q L Where & a positive constant, the price of output is given and denoted by p, and the wage is given and denoted by w. The firm seeks to maximise profits, given by pQ – WL. Show that the first order condition for a profit maximum may be written as: イー : W apL given by L () and hence show that in this case the firm's demand for labour is Further, by examining the second-order conditions explain carefully the requirement that

Suppose a price-taking profit-maximising firm produces output in the short run using only labour as a variable factor. Output (Q) and labour input (L) are related by the equation: Q L Where & a positive constant, the price of output is given and denoted by p, and the wage is given and denoted by w. The firm seeks to maximise profits, given by pQ – WL. Show that the first order condition for a profit maximum may be written as: イー : W apL given by L () and hence show that in this case the firm's demand for labour is Further, by examining the second-order conditions explain carefully the requirement that

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: The Markets For The Factor Of Production

Section: Chapter Questions

Problem 3PA

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