ajaz_204_2013_2014_HW_1

Next assuming this means that in response to a

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Unformatted text preview: eans that in response to a lower , the competitive firm increases output. What is Notice from that “marginal cost” so that is a component of marginal cost. Hence, we can say: in response to a lower “marginal cost”, the competitive firm increases output. Next: This means that in response to any change in (fixed cost) nothing happens to the firm’s output. (f) Use the envelope theorem to calculate, all else equal, the change in Interpret your answers in economic terms. (optimal profits) due to a 1% decrease in We have: ( ) ( )( ) 9 University of Toronto, Department of Economics, ECO 204, 2013 - 20143 Assuming Next: this means that in response to a lower market price, the competitive firm’s optimal profits will fall. () () Assuming Next: ( ) ( )( ) ( )( ) this means that in response to a lower marginal cost, the competitive firm’s optimal profits will rise. ( ) In response to a lower fixed cost, the competitive firm’s optimal profits will rise (by the exact amount of the decrease in fixed cost) (g) Use the value function approach to calculate, all else equal, the change in in Interpret your answers in economic terms. (optimal profits) due to a 1% decrea...
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This homework help was uploaded on 02/15/2014 for the course E 204 taught by Professor Ajaz during the Winter '13 term at University of Toronto- Toronto.

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