Solve for optimal labor demand

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Reference no: EM132200756

Question: A firm uses a production function of the form Y=z*K^0.33*Nd^0.67 and chooses labor input Nd to maximize profits taking the wage rate w that it pays per unit of labor as given. First, write down the profit function of the firm. Assume z=10, K=100, and wage w = $20.

a) Solve for optimal labor demand Nd* of this firm. Nd* =

b) The government now introduces a wage subsidy to help out the firm. The wage subsidy s = $4 per unit of work. Given this subsidy solve for the new optimal output level of the firm. Y* =

c) Calculate the marginal product of labor at Nd = 3.

d) Calculate the marginal product of labor at the optimum, i.e. at Nd*.

Reference no: EM132200756

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