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Suppose You Solve the Profit Maximization Problem for a Single-Input,price-Taking f()f ( \ell )

Question 27

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Suppose you solve the profit maximization problem for a single-input,price-taking producer whose technology is given by f()f ( \ell ) The labor demand function is (w,p)\ell ( w , p )
a.Suppose
d(w,p)dw<0\frac { d \ell ( w , p ) } { d w } < 0 Might
(w,p)\ell ( w , p ) in fact be the correct labor demand function? Explain.
b.Suppose
d(w,p)dw>0\frac { d \ell ( w , p ) } { d w } > 0 Might
(w,p)\ell ( w , p ) in fact be the correct labor demand function? Explain.
c.Intuitively explain how (b)might arise from the profit maximization problem.

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a.Yes -- labor demand functions in face ...

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