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0 Points5 Points8 Points10 PointsYouranswers arenonexistentor extremelytrivial.You attempted the question, but your answer isvery incorrect.You show a fundamentalmisunderstanding of the material. Alternatively,your answer is correct but you offer nojustification where applicable.Your answer is mostly correct, withreasonably minor mathematical orlogic mistakes.Alternatively, youranswer is correct but yourjustification could be stronger.Your answeris fullycorrect andjustified.12.In class we’ve discussed the fact that the baseline models we’ve constructed can be extendedto incorporate more advanced techniques.Let’s look at a specific extension thatincorporates the concept of research & development. In particular, assume that a firm canaffect its marginal cost by investing in R&D.Specifically, marginal costs of productionequal 5/R, where R is the amount spent on R&D.Thus, if the firm spends $1 on R&D,then its marginal costs are 5/1=5 (and its total costs are 5q+1).If the firm spends $2 onR&D, then its marginal costs are 5/2=2.5 (and its total costs are 2.5q+2), and so on.Thefirm has market power and faces a market demand of D(p)=10-p.A.Construct the firm’s profit function as a function of quantity and R&D.B.Find the first order condition(s) needed to solve the firm’s profit-maximizationproblem.
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Chapter 10 / Exercise 4
Microeconomics
Arnold
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13.A specific production process can be represented by the production function,1/21212(,)xf x xxα=+, where0αis a constant and120,0xxA.How much2xcan the firm give up if it was given 1 extra unit of1xand still wantedto produce an identical level of output?Note your answer will be in terms of12,,x xand/orα.Perform any obvious simplifications you see.B.Does this production technology display the Free Disposal property?Make sure tojustify your answer.C.Does this production function display global returns to scale? If so, what type?.Make sure to justify your answer.
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Term
Fall
Professor
Codrin
Tags
Economics, Microeconomics, marginal costs, sequence number, Dominant strategy equilibrium
We have textbook solutions for you!
The document you are viewing contains questions related to this textbook.
Microeconomics
The document you are viewing contains questions related to this textbook.
Chapter 10 / Exercise 4
Microeconomics
Arnold
Expert Verified

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