11. Suppose that a firm that uses 2 inputs has the production function f(x₁, x₂) = 12xx and faces the input prices (P1, P2) and the output price 1. Show that f is concave for ₁> 0 and ₂ > 0, so that the firm's profit function , defined by (1,72₂) = f(x₁, x₂) - P₁1 - P22, is concave.

Linear Algebra: A Modern Introduction
4th Edition
ISBN:9781285463247
Author:David Poole
Publisher:David Poole
Chapter2: Systems Of Linear Equations
Section2.4: Applications
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11. Suppose that a firm that uses 2 inputs has the production function
f(x₁, x₂) = 12xx
and faces the input prices (P₁, P2) and the output price 1. Show that f is concave for ₁> 0 and x₂ > 0,
so that the firm's profit function , defined by (x1, x2) = f(x1, 1T2)-P11 - P22, is concave.
Transcribed Image Text:11. Suppose that a firm that uses 2 inputs has the production function f(x₁, x₂) = 12xx and faces the input prices (P₁, P2) and the output price 1. Show that f is concave for ₁> 0 and x₂ > 0, so that the firm's profit function , defined by (x1, x2) = f(x1, 1T2)-P11 - P22, is concave.
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