ARME608 final EXAM 1996 - Arme 608 Final Exam Fall 1996 1....

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Arme 608 Final Exam Fall 1996 1. Given the following production information for two separate production periods, determine the fixed cost and variable costs of production. Output Total Cost 4 $1,320 2 $1,160 2. Assume a conditional demand function (from cost minimization behavior) for a firm exists, such that no use of an input is observed until the price of that input is lowered to r Ν when x Ν of the input is used. When the price of that input is lowered further, the use of the input remains at x Ν . Draw an isoquant for the technology that generates this conditional demand function. 3. Acme Insurance Company wants to enter the barn insurance market in Barnsville, USA. Although most of the farmers in Barnsville are risk averse, the leading farmer in the community, Mr. Smith, is risk preferring. Acme knows that to sell insurance to the other farmers in Barnsville, it must first sell a policy to Mr. Smith. Can Acme sell a policy to Mr. Smith that requires a premium payment from Mr. Smith that is not negative? Show your results.
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