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Given a perfectly competitive firm in the input and output markets where: P0 = exogenous price, Q = f(K0 , L) where dQ/dL > 0 and d2Q/dL2 < 0, the cost function where: C(K0 , L) = r0K0 + w0L; r0 = exogenous rental rate of capital, K0 = exogenous capital stock, and w0 = exogenous wage.

(a) State the firm's profit function in terms of L.

(b) Find the F.O.C. that maximizes profits at L*.

(d) Find the S.O.C. that maximizes profits at Q*.

(e) Interpret the S.O.C.

(f) Find dQ*/dP0.

(g) Interpret the derivative in (f)

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Macroeconomics, Economics

Category:- Macroeconomics
Reference No.:- M9472646

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