Problem 3 Consider a firm with a production function Q(L,K) = VL+2VK, that faces an inverse demand function P(Q) = 250 – 20, and the labor and capital markets are also in perfect competition. 29
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(a) Derive the expression for the profit function of the firm in terms of labor and capital.
(b) Express the profit maximization problem the firm faces.
(c) Derive the first-order conditions, and use them to get the expressions for the optimal amounts of labor and capital, L* and K*. Get Economics homework help today