econ11_08_hw4_sol

# econ11_08_hw4_sol - Eco11 Fall 2008 Simon Board Economics...

This preview shows pages 1–3. Sign up to view the full content.

Eco11, Fall 2008 Simon Board Economics 11: Solutions to Homework 4 December 4, 2008 Due date: Thursday 4th December. Instructions: You are required to write up your solution separately and independently, al- though you are encouraged to discuss and work in groups. Please write your name, student ID number, and the name of your TA on the front page of the assignment that you hand in. Also, please put boxes around your final answer to each part. 1. Deriving Supply Functions (a) A firm has cost function c ( q ) = q 2 for q < 2 = q 2 + q - 2 for q 2 Derive the firm’s supply curve, q * ( p ). (b) A firm has cost function c ( q ) = q 2 for q < 2 = q 2 - q + 2 for q 2 Derive the firm’s supply curve, q * ( p ). Solution (a) First suppose q < 2. The FOC is p = 2 q Hence q * ( p ) = p/ 2. This assumes that q < 2, and hence p < 4. Next suppose q 2. The FOC is p = 2 q + 1 1

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

View Full Document
Eco11, Fall 2008 Simon Board Figure 1: Convex Cost Function. The black line shows the MC curve. The red line shows the supply curve. Hence q * ( p ) = ( p - 1) / 2. This assumes that q 2 and hence p 5. For p [4 , 5], the firm does not want to produce more than q = 2 at MC = 2 q + 1. It also does not want to produce less that q = 2 at MC = 2 q . Hence the firm will produce q = 2. See figure 1. (a) First suppose q < 2. The FOC is p = 2 q Hence q * ( p ) = p/ 2. This assumes that q < 2, and hence p < 4. Next suppose q 2. The FOC is p = 2 q - 1 Hence q * ( p ) = ( p + 1) / 2. This assumes that q 2 and hence p 3.
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• 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.

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

• 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.

Dana University of Pennsylvania ‘17, Course Hero Intern

• 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.

Jill Tulane University ‘16, Course Hero Intern