L15 Producers.

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Presentation transcript:

L15 Producers

Producers Producers: have a technology Technology given by production function Two inputs: Capital and Labor Example MPL and MPK (decreasing) Short and Long run (fixed K or not) Constant Returns to Scale

Short Run (fixed K) Profit maximization Price taking Example (Short run)

Short run: Demand for Labor

Labor Market: Equilibrium

Labor Market: Equilibrium Capital Preferences Taxes

Labor Market: Minimal Wage

Long run ( not fixed) We choose simultaneously and

Long run

Profit Maximization and CRS Suppose that are optimal What can we say about at ? Profit maximization not always well defined