micro-ex-8 - Ani Guerdjikova Department of Economics...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Ani Guerdjikova Fall 2006 Department of Economics Intermediate Microeconomics Cornell University ECON 313 Problem Set 8 Problem 31 (Cost minimization, profit maximization) A firm produces good y using inputs v 1 and v 2 and the technology y f ( v 1 ; v 2 ) = 2 v 1 / 2 1 v 1 / 2 2 . Let the prices of the inputs be w 1 = 4 and w 2 = 1 . The price of the output is p = 6 . Assume first that the input of v 2 is fixed at ¯ v 2 = 4 in the sort-run. a) Derive the short-run production function and draw it in a diagram. Determine the equation of the isoprofit lines and draw the isoprofit line for a level of profit ¯ π = 20 . b) Derive the short-run profit maximization problem of the firm and determine the optimal pro- duction plan. Assume now that the firm can choose the quantities of both inputs. c) State the cost minimization problem of the firm and derive the firm’s demand for inputs v 1 ( w 1 ; w 2 ; y ) and v 2 ( w 1 ; w 2 ; y ) . d) Determine the profit function of the firm as a function of the produced quantity y and prices w 1 , w 2 and p .
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern