as10 - Q f K , L ln K e ln L e 1 Let p be the price of...

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ECON 331 Written Assignment 10 due in class Dec. 2 1 Consider a multiproduct firm which produces two different products in amounts q 1 and q 2 . The firm is a pricetaker in the market for the first good and receives a price p 1 per unit of the good sold irregardless of the quantity sold. In the second market, the firm is a monopolist and faces a demand curve p 2 a bq 2 for that good. The firm’s cost function is C q 1 , q 2 ce 2 q 1 q 2 Write down the firm’s profit function and find an extreme point for this function with q 2 0 when p 1 2 a . Check that the second order condition for a unique global maximum is satisfied. What effect will an increase in p 1 have on the optimal choices of q 1 and q 2 ? 2. Suppose a perfectly competitive firm has the production function
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Unformatted text preview: Q f K , L ln K e ln L e 1 Let p be the price of output and r and w be the prices of the inputs K and L . (a) Formulate the firms profit maximization problem and write down the first order conditions which determine the firms derived demand functions for each of the two inputs. (These conditions do not have an explicit solution.) (b) Check that the second order condition for a unique global maximum is satisfied. (c) Find an expression for K p , r , w p Obtain a comparative static result from this expression. You will receive instructions by e-mail on how you can get your marked assignment back....
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This note was uploaded on 09/18/2011 for the course ECON 331 taught by Professor Heaps during the Spring '06 term at Simon Fraser.

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