A competitive firm produces its output, y according to the production function: Y = F(K,L), where K and L are capital and labour inputs. The output price is p, and the prices of K and L are s and w,...

E2

Extracted text: A competitive firm produces its output, y according to the production function: Y = F(K,L), where K and L are capital and labour inputs. The output price is p, and the prices of K and L are s and w, respectively. Assume that K is fixed in the short run. In addition, assume that the production function exhibits constant returns to scale in K and L. Define the firm's short-run profit function and show that the firm's short-run supply function is linear in K.