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of labor and capital. This optimization problem involves simultaneously choosing the levels of labor, capital, and output. The resulting labor demand, capital demand, and output supply functions are of the general form

:

:

and

:

Ordinarily labor demand will be an increasing function of the product's selling price p (since a higher p makes it worthwhile to produce more output and to hire additional units of input in order to do so), and a decreasing function of w (since more expensive labor makes it worthwhile

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