Profit maximization The Wicked Witch of the West and Glinda the Good Witch produ

Question

Profit maximization

The Wicked Witch of the West and Glinda the Good Witch produce ruby slippers according to the following production functions: Wicked : Q_w(K, L) = 2K + 2L Good : Q_G(K, L) = K^2 + 2KL + L^2 Both hire flying monkeys for labor, pay the same rent for capital and can freely adjust each factor. If both witches maximize profits, then: Glinda will demand double the number of flying monkeys than the Wicked Witch, but rent the same number of capital. Glinda will demand less flying monkeys than the Wicked Witch. Glinda will demand more flying monkeys but less capital than the Wicked Witch. Glinda will demand the same number of flying monkeys and rent the same number of capital as the Wicked Witch.

Explanation / Answer

3. c) Glinda will demand more flying monkeys but less capital than the Wicked Witch.

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