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ARME608 final EXAM 2000

# ARME608 final EXAM 2000 - = 2 2 1 2 2 1 1 1 2 r 3 2 r r r 3...

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ARME 608 Final Exam Fall 2000 1. Graphically show and explain both short-run and long-run profit as a function of an input price and output price. 2. In a constant cost industry, each firm will operate where ( 29 i i x / f / r AC = , where AC is average cost, r i is the price of input i, and i x / f is the first derivative of the production function wrt x i . True or False? Show why. 3. Explain how technical efficiency of a firm can be measured using linear programming techniques. 4. Specify a Cobb-Douglas revenue function. Indicate any restrictions on the coefficients of that function. 5. How might transaction cost economics be used to determine why a firm produces an input rather than purchases that input? 6. Is the following function a valid cost function?
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Unformatted text preview: + + = 2 2 1 2 2 1 1 1 2 r 3 2 r r r 3 1 y C 7. A farmer can grow three crops: corn, soybeans, or sugar beets. The probability distribution of their net returns per acre are: Corn \$5 (ñ = .3) \$15 (ñ = .2) \$20 (ñ = .4) \$25 (ñ = .1) Soybeans \$8 (ñ = .1) \$10 (ñ = .2) \$25 (ñ = .3) \$30 (ñ = .4) Sugar beets \$5 (ñ = .2) \$15 (ñ = .3) \$30 (ñ = .5) Which crop(s) would you recommend to a farmer with increasing utility? Which crop(s) would you recommend to a farmer who is risk averse? 8. Explain the concept of real option theory in comparison to net present value analysis....
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