This preview shows page 1. Sign up to view the full content.
Unformatted text preview: titive firm (i.e. price taker) with the cost function
total fixed cost and
is a constant.
(a) Write down the profit equation in terms of
(b) Denote profits by
function. (the price), where is the and the cost function. and output by . Write down the profit equation in terms of (the price), (c) For what parameter values is the function in part (b) a concave function? (d) What value(s) of and the cost function in part (b)? Additionally, derive the value function. maximizes the (e) All else equal, what is the change in due to a 1% decrease in (f) Use the envelope theorem to calculate, all else equal, the change in
Interpret your answers in economic terms. Interpret your answers in economic terms.
(optimal profits) due to a 1% decrease in (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% decrease 2 University of Toronto, Department of Economics, ECO 204, 2013  20143 ANSWERS
Question 1
Plot the following functions in Wolfram Alpha:
(a) (b) (c) √ from √ from from 3 University of Toronto, Department of Economics, ECO 204, 2013  20143 ()
( ) from
(d)
parts (c) and (d)? . By th...
View
Full
Document
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.
 Winter '13
 AJAZ

Click to edit the document details