0
$\begingroup$

​Hi, I don't get how the answer of d is deduced in this question because I don't think I made any mistakes in my calculation and have also used all the information given. After knowing L is 800, I found out the did 200*Q which gives me 5656 and I worked out the profit to be negative but it is not -15000. What did I do wrong in my calculation? enter image description here Thanks

enter image description here

|improve this question
$\endgroup$
1
$\begingroup$

Max enter image description here

Then you have: Max 200*L^(0.5) - 10*L - 16000

Which gives you: enter image description here

So L = 100, and you have a loss of 15000

|improve this answer
$\endgroup$
  • 1
    $\begingroup$ He is right. The problem with your calculations is that you want to use MPl/MPk= w/v whenever you are finding both K and L (typically considered the Long run solution) Here since you already have K fixed (often considered the short run problem), you want to equate the value of the marginal productivity of labor to the wage: P*MPl=w. This is exactly his third equation. Notice how in the problem before taking derivatives he plugged in the value of K $\endgroup$ – Regio May 21 '19 at 4:42
  • $\begingroup$ Thanks a lot! This is helpful. $\endgroup$ – onetwothree May 21 '19 at 9:25
  • $\begingroup$ Sorry, in the first equation it's 16*K. $\endgroup$ – Guilherme Cruz May 21 '19 at 11:28

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.