A firm produces output of chips y using a cost function cy, Ask an Expert

Economics

A firm produces output of chips y using a cost function c(y), which exhibits increasing marginal costs.

Of the chips it produces, a fraction 1 − α are defective and cannot be sold. Working chips can be sold at

a price p and the chip market is highly competitive.

a) Calculate the derivative of profits with respect to α and its sign.

b) Calculate the derivative of output with respect to α and its sign.

c) Suppose that there are n identical chip producers. Let D(p) be the demand function, and let p(α) be the competitive equilibrium price. Calculate dp/dαand its sign.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M92000339

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