HomeworkAssignment2(fall2009)

HomeworkAssignment2(fall2009) - Homework Assignment 2 Econ...

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Homework Assignment 2 Econ 7130 Instructions : Please provide your answers to the following questions in the spaces beneath each question. Make sure to clearly show your work and explain your answers for full credit. There are a total of 50 points possible. 1. (5 points) Do Problem 3.4 in Varian (page 48). (Clarification : For this problem, you only have to calculate the profit-maximizing demand and supply functions. Also, note that the restrictions on a 1 and a 2 are such that the factor demand curves are downward-sloping in w 1 and w 2 , respectively, and that the output supply curve is upward sloping in p ). 1

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2. (5 points) Let the amounts for input 1, 2, 3, and 4 be represented by x 1 , x 2 , x 3 , and x 4 , respectively. The corresponding per-unit prices for these inputs are \$4, \$1, \$3, and \$2, respectively. (a) If the production function is given by f(x 1 , x 2 , x 3 , x 4 ) = min{x 1 + x 2 , x 3 + x 4 } , what is the minimum cost of producing one unit of output? Show your work for
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HomeworkAssignment2(fall2009) - Homework Assignment 2 Econ...

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