400ps5-11 - ECON 400 Winter 2011 Problem Set V(for...

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ECON 400 Hartman Winter 2011 Problem Set V (for Wednesday, February 2) 1. A firm uses capital, K , and labor, L , to produce output, Q . The firm is a price taker in the output market and in both input markets; the output price is 0 p , the price of the capital input is 0 r , and the price of the labor input is 0 w The firm's supply function is 12 *( , , ) a Qp r wm p rw , its demand function for capital is 42 3 b Kp r w p r w , and its demand function for labor is 43 c Lp r wn p r w . What are the values of the constants a , b , c , m , and n ? Explain your reasoning in each case. [Hint: remember that these functions are homogeneous of degree zero in prices, and recall the reciprocity relationships. ] 2. A firm produces two outputs, 1 y and 2 y , using one input, x . If the outputs of the two goods are 1 y and 2 y , then the amount of the input required is given by the function (, ) x gy y . The prices of the outputs are, 1 p and 2 p , respectively, and the price of the input is w .
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This note was uploaded on 04/04/2011 for the course ECON 400 taught by Professor Ellis,g during the Spring '08 term at University of Washington.

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