Q1. Consider a firm as we did in the notes that maximizes it profits by selecting how many workers and how much capital to use. For this problem, set P = $1, W = $10, A = 10/.7, r = .01, pk = .01, d = .1, and K = 5. Use the Cobb-Douglas production, so that revenue for this firm is PAK.3L.7.
a. Elucidate the no. of workers would this firm hire? Allusion is being sure that you compare the added benefits and added costs of each worker when the Cobb-Douglas production function is used.
b. If K rose to 7, would this firm hire more or fewer workers? Why?
Q2. It appears that your best income earning opportunity is to be an offer to work for a local developer during the month of June and earn $2000. Nevertheless as before pleasing the job, you admit a surprise offer from a competitor. Elucidate how much producer surplus have you earned, if you actually earn $2600 during the month?