Arme 608Final ExamFall 19961. Given the following production information for two separate production periods, determine the fixed cost andvariable costs of production.OutputTotal Cost4$1,3202$1,1602. Assume a conditional demand function (from cost minimization behavior) for a firm exists, such that no use ofan input is observed until the price of that input is lowered to rΝwhen xΝof the input is used. When the priceof that input is lowered further, the use of the input remains at xΝ. Draw an isoquant for the technology thatgenerates this conditional demand function.3. Acme Insurance Company wants to enter the barn insurance market in Barnsville, USA. Although most of thefarmers in Barnsville are risk averse, the leading farmer in the community, Mr. Smith, is risk preferring. Acmeknows that to sell insurance to the other farmers in Barnsville, it must first sell a policy to Mr. Smith. Can Acmesell a policy to Mr. Smith that requires a premium payment from Mr. Smith that is not negative? Show yourresults.
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