hw06_2008 - UNC-Wilmington Department of Economics and...

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UNC-Wilmington ECN 321 Department of Economics and Finance Dr. Chris Dumas Homework 6 (Due Tuesday, November 11) 1) Suppose that a firm produces a single product Q using inputs L and K. Suppose that Q can be produced with either L or K alone, or with some combination of the two. Suppose each L produces 4 units of Q, and suppose each K produces (1/2) unit of Q. If P Q = $8, P K = $3 and P L = $2, what should the firm do to maximize profits? 2) Suppose that a firm produces a single product Q using inputs L and K. Suppose that the firm needs both L and K to produce Q, and L and K must be used in fixed- proportions. Suppose the firm can produce 1 unit of Q for each 8 units of L used in production, and suppose that 4 units of K must be used with each unit of L. If P Q = $100, P K = $2.5 and P L = $8, what should the firm do to maximize profits? 3) Suppose a firm is producing a single product, Q, using two inputs, L and K. The price of Q is P Q per unit, the price of L is P L per unit, and the price of K is P K per unit. The
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