Unformatted text preview: diagram and label your diagram completely. b. Find conditions that determine Pareto optimal allocations for this economy. c. Find a competitive equilibrium for this economy. 3. Let f ( x 1 ,x 2 ) = √ x 1 + √ x 2 be the production function of a ﬁrm. Let input prices be w 1 = $2, w 2 = $8, and output price p = $16. Assume input 2 is ﬁxed in the short run at ¯ x 2 = 100. a. Are the inputs perfect substitutes or perfect complements? b. Find the LR and SR proﬁtmaximizing quantities of the inputs at the given prices. Calculate maximum proﬁts. c. What are the LR and SR costminimizing quantities of the inputs that the ﬁrm should use to produce y = 90? d. Find the ﬁrm’s LR and SR cost functions. 1...
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 Fall '09
 QIN
 Economics, Pareto optimal allocations, inputs perfect substitutes, SR costminimizing quantities, SR proﬁtmaximizing quantities, SR cost functions

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