Question

In: Economics

For a company under complete competition, the following production function applies Q = F (K, L)...

For a company under complete competition, the following production function applies

Q = F (K, L) = KL

where Q is the size of production, K is the size of the capital contribution and L the amount of labor.

a) What is the marginal product for labor, MP L ?

b) Assume that the price of the finished product is SEK 15. What is the value of the marginal product

    for Labor , MRP L ?

c) Suppose another company in a fully competitive market has MRP L = 450 - 0.5 L.

   If the salary in the market is SEK 0, how many units of labor should it

    profit maximizing company hire?

d) Assume that the market consists of 4 companies that are all identical to the company in question c)

  and that the conditions are also otherwise ic).

( i) Specify the function for labor market demand.                   

ii) How many units of labor are in demand in the market ?

Solutions

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