Cornell University Economics 3130 Problem Set 6 Due 3/13/09 1. True/False/Explain. State whether each of the following is true or false, and explain why. Please limit your answers to no more than two sentences. All credit is based on the explanation. (a) Whenever a ﬁrm is maximizing proﬁts, it must also be minimizing costs. 2. Suppose your production function is f ( l,k ) = l 1 3 k 1 3 , the price of labor is w and the price of capital is r . (a) Determine the conditional input demand functions of k and l from the cost min-imization problem. What is the cost function c ( y,w,r )? (b) What is the ﬁrm’s marginal cost function? What is the ﬁrm’s supply function? (c) Solve the ﬁrm’s proﬁt maximization problem to generate the input demand func-tions. (d) From the input demand functions, determine the supply function. Compare your result to what you got previously. (e) If k was ﬁxed at k = 1 in the short run, what would the supply function be? Is
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This note was uploaded on 08/29/2009 for the course ECON 3130 taught by Professor Masson during the Spring '06 term at Cornell University (Engineering School).