(Theory of the Firm) Profits University produces student credit hours (y) with t
ID: 1232136 • Letter: #
Question
(Theory of the Firm) Profits University produces student credit hours (y) with two inputs: Professors' hours of work (X1) and TAs' hours of work (x2) according to the production function: f(x1,x2)= 10x1.5 x2.25. Both inputs are variable. Suppose professors are paid $80 per hour and TAs are paid $2.50 per hour Profits receive $40 per credit hour. (Profit maximization, both inputs variable) What is the expression for profits as a (unction of prices and inputs? What is the expression for revenue? For marginal revenue products of each of the inputs?Explanation / Answer
a) 40* 10 x1.5 x2.25 -80 x1 -2.50 x2
b) 40* 10 x1.5 x2.25
40* 5 x1(-,5)x2.25 MRP x1 (take partial derivative with respect to x1)
50*2,5 x1.5 x2(-.75)MRP x2 (take partial derivative with respect to x2)
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