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Unformatted text preview: MP L ) and capital ( MP K ) and fnd the rate oF change oF MP L due to a change in labor and MP K due to a change in capital respectively. Does the law oF diminishing marginal productivity oF labor and capital, hold For this production Function? (c) VeriFy that the rate oF change oF MP L with respect to (w.r.t.) K is the same as the rate oF change oF MP K w.r.t. L . [ This is an application of Young’s Theorem ] Q3. IF a frm spends $ a per unit oF output on advertising then it can sell q units oF output at a price given by p = 1002 q + 8 a 1 2 . ±urther, in order to produce q units oF output it costs the frm 4 q + q 2 . (a) Find the proft ±unction ( π ) ±or the frm. (b) I± the frm maximizes profts, how much will it spend on advertising and how much output will it produce? Remember to check the SOC’s....
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 Spring '09
 tsui
 Economics

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