The first-order conditions for maximizing profits,  = P × F(K,L)- wL − rK,are: A) P × {  F(K, L) /  K} − r = 0 and P × {  F(K, L) /  L} − w = 0. B) P × MP_K − r = 0 and P × MP_L − w = 0. C) VMP_K = r and VMP_L = w. D) All of the answers are correct.

Question

Quizplus · Accepted Answer

The first-order conditions for maximizing profits involve setting the marginal product of capital and labor (after adjusting for price) equal to their respective costs (rental rate of capital, r, and wage rate, w). All options provided represent this principle in different notations, thus all are correct.

The First-Order Conditions for Maximizing Profits, = P ×