Question: Suppose a firm produces a single output with technology, q = √(x1 + x2) where q is output, and x1 and x2 are the inputs. The costs per unit of inputs are w1 and w2. a) Derive the conditional input demand functions for the firm. b) What is the cost function for the firm and what type of returns to scale is it? c) What are the firm's output supply and profit functions? Note: it pays to use the cost function you derived in b) to answer this given the nature of the production technology.
Question: Suppose a firm produces a single output with technology, q = √(x1 + x2) where q is output, and x1 and x2 are the inputs. The costs per unit of inputs are w1 and w2. a) Derive the conditional input demand functions for the firm. b) What is the cost function for the firm and what type of returns to scale is it? c) What are the firm's output supply and profit functions? Note: it pays to use the cost function you derived in b) to answer this given the nature of the production technology.
Chapter11: Profit Maximization
Section: Chapter Questions
Problem 11.9P
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Transcribed Image Text:Question:
Suppose a firm produces a single output with technology, q = √(x1 + x2) where q is output, and x1 and x2 are the inputs. The
costs per unit of inputs are w1 and w2. a) Derive the conditional input demand functions for the firm. b) What is the cost function
for the firm and what type of returns to scale is it? c) What are the firm's output supply and profit functions? Note: it pays to use
the cost function you derived in b) to answer this given the nature of the production technology.
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