A10 Consider a competitive firm that produces bots. Labor (L) and capital (K) are the only two inputs of production; each unit of labor is paid the marketwage (w), and each unit of capital is rented at the rental price of capital (r). Output (q) is therefore a function of labor and capital, or q = f (K, L), andis sold at the market price (P).The goal of this firm is to maximize profit given the price of bots, the wage rate, the rental rate of capital, and production technology by choosing itslabor and capital inputs.Fill in the following equations with the firm's profit maximization problem:Profit=Profit-maximizing firms must determine how hiring an additional unit f labor will affect profit. To do this, the firm can compare the change in revenuefrom hiring an additional unit of labor against the cost of that extra worker. The additional output produced by an extra unit of labor is equal to themarginal product of labor (MPL). Because each bot sells for the market price (P), the change in revenue from hiring an additional worker is, andthe change in cost is. Given this condition, which of the following equations correctlyFirms will continue to hire workers until the change in profit isdescribes the profit-maximizing labor choice of the firm?MP,W =P○ MPL = P○ MPL =O MPL = w x PDemonstrate your understanding of the previous concepts in the following example. Suppose the price of a bot is equal to $2, and the market wage rateis $16. Moreover, suppose the marginal product of labor for this firm is equal to the following:MPL = 18 - LIn this case, the real wage rate isbots per unit of labor, and the firm will hireunits of labor.

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Consider a competitive firm that produces bots. Labor (L) and capital (K) are the only two inputs of production; each unit of labor is paid the market wage (w), and each unit of capital is rented at the rental price of capital (r). Output (q) is therefore a function of labor and capital, or q = f (K, L), and is sold at the market price (P). The goal of this firm is to maximize profit given the price of bots, the wage rate, the rental rate of capital, and production technology by choosing its labor and capital inputs. Fill in the following equations with the firm's profit maximization problem:

Consider a competitive firm that produces bots. Labor (L) and capital (K) are the only two inputs of production; each unit of labor is paid the market wage (w), and each unit of capital is rented at the rental price of capital (r). Output (q) is therefore a function of labor and capital, or q = f (K, L), and is sold at the market price (P). The goal of this firm is to maximize profit given the price of bots, the wage rate, the rental rate of capital, and production technology by choosing its labor and capital inputs. Fill in the following equations with the firm's profit maximization problem:

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.3P

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