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A firm has a cost function given by the following:

c(w1, w2, y)= w1w2y^2/(w1+w2)

where the wi's are the prices of the factors (inputs) x1 and x2 respectively, and y is output.

a) Is this a legitimate cost function?

b) Find out the firm's production function, y= f(x1, x2).

c) From the cost function derive the firm's conditional (output constant) demand function x1(w,y).

d) From the cost function derive the firm's profit function for output price p, pi(w,p). What is the firm's supply function? Use the firm's supply function results and the results from part (c) to derive the Marshallian demand function x1(w,p)

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M937957

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