micro-fall2007-13 - Firms and Production The decision...

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Firms and Production Choose ( y ; v ) so that π ( y ; v ) : = py wv is maximized under the constraints y ± f ( v ) y ² 0 and v ² 0. Ani Guerdjikova ECON 313 Fall 2007 131 / 152
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Firms and Production First-order conditions: Marginal product = Real wage w p = MP ( v ) Production function y = f ( v ) Solution: v = v ( p ; w ) factor demand y = y ( p ; w ) supply of consumption goods π = π ( p ; w ) Ani Guerdjikova ECON 313 Fall 2007 132 / 152
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Firms and Production 6 - v f ( v ) y 0 Production function Ani Guerdjikova ECON 313 Fall 2007 133 / 152
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6 - v y f ( v ) ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! w p π p π p . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 / 152
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micro-fall2007-13 - Firms and Production The decision...

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