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 profitmaximizing demand and supply functions.
Also, note that the restrictions on
a
1
and
a
2
are such that the factor demand curves are downwardsloping in
w
1
and
w
2
, respectively, and that the
output supply curve is upward sloping in
p
).
1
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View Full Document2. (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 perunit 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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 Spring '10
 Kutler
 Economics, Microeconomics, Supply And Demand, X1

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