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Unformatted text preview: InClass Group Exercise A firm’s production function is given by Q = K 1 2 L1 2 and its capital is fixed at 1 unit.
a. Calculate the average product of labor when 9 units of labor are utilized. b. Calculate the marginal product of labor when 9 units of labor are utilized. c. Suppose the firm can hire labor at a wage of $10 per hour and output can be sold
at a price of $100 per unit. Determine the profitmaximizing levels of labor and
output. d. What is the maximum price of capital at which the firm will still make nonnegative
profits? //home/vdimitrov/17052/a6e1ceeaefde4188294dd4e76588dbf88be8763f.doc Page 1 ...
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 Fall '08
 Crawford,L

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