The following description will be used in questions 2a throu…
The following description will be used in questions 2a through 2e and in bonus II. A firm produces x according to the cost function c(x)=20x+25. The demand for x is represented by the inverse price demand curve p=A-bx, where p is the price faced by consumers and A and b are positive numbers.
Read DetailsThe following description will be used in questions 3a to 3d…
The following description will be used in questions 3a to 3d and bonus III. Consider a firm that produces output y using capital k and labor l, according to the technology described by f(k,l) ≥ y and following a restriction g(k,l) ≥M; where f and g are functions of k and l, and M is a nonnegative value. Let r be the rental rate for capital and w the wage rate. If the firm takes its output y as given and chooses inputs k and l to minimize costs, then the firm’s cost minimization problem is: minimize rk +wl , by choosing k,l subject to: f(k,l) = y and g(k,l) ≥M
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