-A fixed cost is avoidable if the firm doesnt incur the cost if it produces no output
-A firms isocost line connects all the input combinations with the same price
-Boundary solution: If the least-cost input combination doesnt include all inputs
-Efficien
ECON 302 - Intermediate Microeconomic Theory
Summer 2012
Homework 03
Instructor: Raul Santos
1. Consider an industry with two rms. Firm 1 is the industrys leader and it chooses the quantity of
output rst. Firm 2, the follower, chooses the quantity of outp
ECON 302 Intermediate Microeconomics Theory
Summer 2012
Instructor: Raul Santos
Homework 2: due Tuesday 07/10 (in class).
1. Consider an individual with preferences
,
=
/
/
, where
represents the
amount of consumption good the individual consumes and repr
ECON 302 Intermediate Microeconomic Theory
Summer 2012
Instructor: Raul Santos
Homework 1: due Tuesday 06/26 (in class).
1.
Maximize
the
function
f ( x, y ) = x1 / 3 y 2 / 3
subject
to
the
constraint
h( x, y ) = 2 x + 3 y = 36 . (You dont have to check th