A firm has a production function F(L,K), where K is a fixed amount of capital, and L is the...
Question:
A firm has a production function F(L,K), where K is a fixed amount of capital, and L is the variable amount of labor hired. The equation {eq}w= pF_{L}(L,K) {/eq} determines the amount of labor that the firm hires. If L is considered as an implicit function of K, p, and w, then derive an equation for {eq}\displaystyle \frac{\partial{L}}{\partial{w}} {/eq}.
Labor Demand Function:
The labor demand function describes the quantity of labor a firm demands given wage rate in the market. In a competitive market, a firm will hire labor up to a point at which the marginal revenue product of the last unit of labor hired is equal to the market wage rate.
Answer and Explanation: 1
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View this answerIn a competitive market, the firms will take prices {eq}w, P{/eq} as given. In addition, we know that the quantity of capital {eq}K{/eq} is fixed. In...
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