Answered step by step
Verified Expert Solution
Question
1 Approved Answer
question 5 is the seocnd pictures (17 points) Using the production function and input and output price information from Question 5 above, suppose that the
question 5 is the seocnd pictures
(17 points) Using the production function and input and output price information from Question 5 above, suppose that the firm now faces a budget constraint that limits the amounts of the two variable inputs it can purchase. Specifically, assume the firm has only $3,000 available to purchase its variable inputs. How much of each input will the firm use to maximize its output, given the budget constraint? How much will it produce? What will its profit be at that point? Interpret the Lagrangean multiplier calculated. Assume a profit-maximizing firm produces its output according to this response function, Y = 35 + 120x + 150x2 1.5x12-2.5x22 Assume also that this firm receives $2.00 per unit for what it sells and it pays $64.00 per unit for the input Xi and $48.00 per unit for input x2. Using this response function and price information: a. (10 points) Derive this firm's optimal input levels. 4 points) Verify these critical values satisfy the second order conditions for a profit maximum points) Derive this firm's optimal output level. Doints) Verify that your solution satisfies the Total Condition. Dints) Derive this firm's maximum profit Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started