Develop the conclusion of the preceding example to show that the regulated firm does not produce at minimum cost (see example 5.16).
Example 5.16
Suppose that (x*, y*) is a local optimum of

subject to g(x, y) = 0 and y > 0
and a regular point of g. Then there exist multipliers λ1, λ2, . . . ; λm such that

With

Transcribed Image Text:

max f(x, y) x, y Vi0