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Unformatted text preview: k experts (input) to prepare the report. Each of them receives an independent signal whether the event occurred or not, which is correct with probability 1 > p > . 5. Calculate the production function q = f ( k ) for (at least) k = 1, 2, 3, . . . . We say that a discrete production function is concave if the sequence of marginal product is nonincreasing. Is the Frms production func-tion concave? Assume that the Frm needs information in order to make a decision whether to invest amount m that will yield revenue m if the event occurs, and 0 otherwise; the decision maker chooses k in order to maximize expected proFts. Assume that the wage of each worker is w . Explain why it is true that if f is concave, the Frm chooses k so that the k th worker is the last one for whom marginal revenue exceeds the cost of a single worker. Is this conclusion true in our case?...
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- Fall '10