Microeconomics

Paper instructions:
1. Suppose that a Bag manufacturing firm sells bags in perfectly competitive market for $10 a bag, and that the firm has the following production function: Q = L2 + K 0.5
a. Write expressions for MRPL and MRPK.
b. Using profit maximization as the objective function for the firm, determine demand functions for K and L. That is, write expressions for optimal quantities of L and K, L* and K*.
HINT: This question is from Chapter 15.
c. How does the optimal L* change as the wage increases? How does the optimal K* change as the rental rate r increases? Use calculus to figure this.
d. Re-write the demand function for L if the price of the bag is P not $10.
2. a. Explain in words how does Indifference curve analysis explain demand for a good. If it helps, you may use a specific product like Bread. (that is, use indifference curve analysis terms to explain the demand for Bread).
b. Income elasticity of demand for Crystal Chandeliers has a high positive value (or number). With the help of indifference curves and budget lines explain the meaning of high income elasticity of demand for chandeliers.
Label the axes, the curves and lines appropriately.
c. Explain in detail how should Murano Inc., a chandelier maker use the information related to income elasticity of demand in deciding the production of chandeliers.CLICK HERE TO ORDER THIS ESSAY!!!!