PS3 - EEP101/ECON125 Spring 99 Prof D. Zilberman TA's:...

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EEP101/ECON125 Spring 99 Prof D. Zilberman TA's: Malick/Marceau 3/9/99 1 PROBLEM SET 3 Due Tuesday, March 16, 1999, in class (Late assignments will not be graded) 1. Assume that Y is produced using flood irrigation . Let the irrigation efficiency, (effective input / applied input) be h . P x is the price of input water (X) and P y is the price of the crop. The production function for Y is given by, Y = ( h X) β where β is a positive parameter. (a) Before using any numbers, i. Write down the profit maximization problem. ii. Solve for the optimal amount of X, as a function of P x , P y , h , and β . (b) Assume that P x = $80, P y = 500, and β = 0.75. Also, assume there are two possible irrigation technologies: Furrow irrigation ( h = 0.6 ) and drip irrigation ( h = 0.9 ). i. For furrow irrigation , 1. Calculate the input demand for X . 2. Calculate the output supply of Y. 3. Calculate the profits. ii. For drip irrigation , 1. Calculate the input demand for X . 2. Calculate the output supply of Y. 3. Calculate the profits. Summarize your results in a table.
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EEP101/ECON125 Spring 99 Prof D. Zilberman TA's: Malick/Marceau 3/9/99 2 iii. If the grower is currently using furrow irrigation
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PS3 - EEP101/ECON125 Spring 99 Prof D. Zilberman TA's:...

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