Ask Question, Ask an Expert


Ask Microeconomics Expert

problems 1 and 2 are based on the given scenario:

Ruritania’s currency is the euro (€), and its only coal-mining company is a price-taker in the euro-area market for coal. The company sells at €90 per tonne to specialist wholesalers and faces no transportation costs on the coal it produces. It’s just variable costs relate to two distinct labor types, skilled (engineers and so on) and unskilled. Skilled workers command an hourly wage of €25, while that of unskilled workers is €8. Fixed costs are avoided. The firm’s production function is quadratic in both skilled and unskilled labor hours (correspondingly symbolized S and U):

qc = 100S – 2S2 + 200U - 5U2 + 2SU

problem 1: By using the above information:

a) Derive an expression for the firm’s profit solely in terms of S and U.

b) By applying the implicit function theorem suitably (that is, by making use of a total differential for profit), get an algebraic expression for the slope of any given iso- profit contour in S, U space. Depict the firm’s iso-profit map in S, U space (that is, with S on the horizontal axis and U on the vertical) and describe how the slope expression gives insight into the shape of iso-profit contours.

c) Obtain first-order conditions for the firm’s optimal combination of S and U. Solve these equations for S and U by means of Cramer’s rule and state the amount of profit related with your solutions (which must be stated to 3 d.p.).

d) Get a second-order total differential (that is, quadratic form in dS and dU), express this in matrix form, and investigate whether the second-order conditions for the maximum or minimum are satisfied. Give a short prose talk of this procedure.

problem 2: Now suppose that Ruritania’s government passes legislation that restricts each firm to hire no more than 30 hours of skilled labor.

a) Set up the Lagrangian function and proceed to get and resolve by means of Cramer’s rule the first-order conditions for the optimal S, U input combination when the firm is subject to this constraint. Comment in brief on how your solutions for S and U, and the associated profit, compare with such obtained earlier for the unconstrained case.

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M96221

Have any Question? 

Related Questions in Microeconomics

Economics money bankingintroductioneconomics money and

Economics Money Banking Introduction Economics Money and Banking focuses on the traditional model of money and banking in the American banking system, a mixed capitalist economy. The course explains the functions of mone ...

Microeconomics - cost elements of a businessassignmentin

Microeconomics - Cost Elements of a Business Assignment In this Assignment, you will define and calculate the remaining six major cost elements of a business, when given the Total Costs and the Quantity Produced, as well ...

Question 1 suppose you are given the following information

Question 1: Suppose you are given the following information about an industry: Q D = 8000 - 100p; Q S SR = 20 + 700p; c(q) = 20 + q 2 /20. where q and c (q) stand for a firm's quantity supplied and cost function; Q S SR ...

Assignment external financinggenesis energys newly

Assignment: External Financing Genesis Energy's newly established operations management team decided to seek outside assistance in developing a long-term operating plan that also addresses the financial issues identified ...

Organizational structures please respond to the following

Organizational Structures" Please respond to the following: FOR pro jamila • Watch the video "How to align the organizational structure with the work processes," found at ...

Microeconomicsassignment capitalism and the us economyin a

Microeconomics Assignment: Capitalism and the U.S. Economy In a command or planned economy, the government, not the market, regulates the factors of production and economic activities considered essential to the function ...

Assignmentuse the globaledge website to complete the

Assignment Use the globalEDGE website to complete the following exercises: • The World Trade Organization maintains a database of regional trade agreements. You can search this database to identify all agreements that a ...

Assignmentevery one is different so too are project

Assignment Every one is different, so too are project managers. Each has their own style and personality. The 'human' traits of a project manager are most apparent during the monitoring and controlling phase of the proje ...

Assignmentlearning activity 1 - theme 1a discuss the

Assignment Learning Activity 1 - Theme 1 a.) Discuss the classifications of organizational theory and their precepts and what can we learn from its history? b.) For businesses to succeed they must maintain a competitive ...

Economicsselect a new realistic good or service for an

Economics Select a new, realistic good or service for an existing industry, preferably an industry you current work in or one in which you are interested in working. Develop a 1,400-word evaluation of pricing strategies ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate