A firm uses the production technology q = (x + x2), where a is a constant and 0 p < 1. (a) Derive the firm's cost function, c(W₁, W2, q). (b) Derive the firm's profit, (p, w₁, W₂). (c) Derive the elasticity of scale for this production technology. (d) What restrictions must a satisfy to ensure that the profit function is well-defined? Explain.
A firm uses the production technology q = (x + x2), where a is a constant and 0 p < 1. (a) Derive the firm's cost function, c(W₁, W2, q). (b) Derive the firm's profit, (p, w₁, W₂). (c) Derive the elasticity of scale for this production technology. (d) What restrictions must a satisfy to ensure that the profit function is well-defined? Explain.
Managerial Economics: A Problem Solving Approach
5th Edition
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Chapter7: Economies Of Scale And Scope
Section: Chapter Questions
Problem 5MC
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