3. Consider the profit function for firm that can produce 1 finished good y with 2 factors 1 and 22. Say one factor (factor 2) is fixed. Say the output price is fixed, and the production function is Cobb-Douglas and constant returns to scale. Say further the factor price for factor 1 increases, everything else fixed. Then output can either fall or rise if the firm is profit maximizing. 4. Consider the same setting as question 3. Now, say that the price of the finished output good goes up, everything else fixed. Then the demand for factor 1 must necessarily increase. 5. Again consider the same production setting of question 3, but consider the cost minimization problem in the short-run. In this case, it must be true the cost function is concave in output. True or False?
3. Consider the profit function for firm that can produce 1 finished good y with 2 factors 1 and 22. Say one factor (factor 2) is fixed. Say the output price is fixed, and the production function is Cobb-Douglas and constant returns to scale. Say further the factor price for factor 1 increases, everything else fixed. Then output can either fall or rise if the firm is profit maximizing. 4. Consider the same setting as question 3. Now, say that the price of the finished output good goes up, everything else fixed. Then the demand for factor 1 must necessarily increase. 5. Again consider the same production setting of question 3, but consider the cost minimization problem in the short-run. In this case, it must be true the cost function is concave in output. True or False?
Chapter11: The Firm: Production And Costs
Section: Chapter Questions
Problem 21P
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 5 steps with 13 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Exploring Economics
Economics
ISBN:
9781544336329
Author:
Robert L. Sexton
Publisher:
SAGE Publications, Inc
Principles of Microeconomics
Economics
ISBN:
9781305156050
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax