3H. Cobb-Douglas Production

• Example: Q = 100xK.5xL.5

• Then MPL = dQ/dL  = 100xK.5x.5xL-.5 = 50xK.5/L.5which decreases as L increases

• Given K, w and P can solve for Lusing hire L until P x MPL = w

• long-run3. Price of labor = hourly wage rate4. Firms are price-takers.

• SR and LR conditionsMonopoly and monopsonySubstitutes and complementsPayroll Tax

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