Tuesday

October 21, 2014

October 21, 2014

Posted by **tofu** on Saturday, March 10, 2007 at 2:59am.

1. Suppose a firm has a production function Q = 3(squareroot)N, where N is labour.

Suppose the wage is 3, and the price of the output 4.

(a) Write the Firm profits

(b) Calculate the firm optimal labour choice when the wage is 3.

2. 2. Suppose a fim has a production function Q = 3(squareroot)N, where N is labour.

Suppose the price of the output 4. Derive the firm labour demand

a) I suggest you create a table. Columns are N, Q, Total Revenue, and Profit. Rows are N=1,N=2,...N=5. That is, calculate Q, Total Revenue, and profit when wage=3*N and when N=1, when N=2 and so on. Where is profit maximized?

b) use the table you created in a) How much would the firm pay per worker if it only wanted 1 worker, if it wanted 2 workers, ... if it wanted 5 workers.

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