ARME608 final EXAM 1995

# ARME608 final EXAM 1995 - ARME 608 Final Exam Fall 1995...

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ARME 608 Final Exam Fall 1995 1. Consider the production function y = x 1 x 2 + x 1 2 x 2 2 . Is it homogeneous? Is it homothetic? 2. For the following crop production function, derive the demand functions, supply function, and the profit function: y = 5x 1 .5 + 2x 2 .5 3. Consider the following representation of a firm’s cost function: Cy r r r =+ + 2 11 2 2 1 3 2 3 1 2 1 2 r where y is output and r i is the price of the ith input. Is this a plausible cost function? Why or why not? 4. A farmer produces an output by the single input production process y 1 = f(x). Unfortunately, the production of y 1 has a negative impact on y 2 that the farmer also produces. Determine how much input x the farmer should use to maximize profits. 5. Consider a profit-maximizing farm with the production function y = f(x 1 ,x 2 ) facing output price ρ and factor prices r 1 and r 2 . Suppose the farm is taxed according to the total cost of factor 2 at rate t.
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