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?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 21P

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