Unformatted text preview: Q f K , L ln K e ln L e 1 Let p be the price of output and r and w be the prices of the inputs K and L . (a) Formulate the firm’s profit maximization problem and write down the first order conditions which determine the firm’s derived demand functions for each of the two inputs. (These conditions do not have an explicit solution.) (b) Check that the second order condition for a unique global maximum is satisfied. (c) Find an expression for K p , r , w p Obtain a comparative static result from this expression. You will receive instructions by e-mail on how you can get your marked assignment back....
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- Spring '06
- Economics, profit maximization problem, order condition, firm’s profit, comparative static result