Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question in computer science sir solve this problem and provide me correct solution I ' m in very hurry... Question 1 Consider the following production

Question in computer science sir solve this problem and provide me correct solution I'm in very hurry...
Question 1 Consider the following production function:
y=F(L,K)=4L1tK13
where L and K are the amount of labour and capital used in the production process, and y is the output. Throughout this question, the output price p is 3 and the rental rate of capital r is 1.
We will first consider a firm in the short run, where the amount of capital is fixed at K=64. The fixed cost is therefore 64.
(a)(Level A) Is there diminishing returns to labour? Explain.
(b)(Level A) Suppose the wage rate w is 1. Find the profit-maximising choice of L. Calculate the profit-maximising output level and the maximised profit. (There is no need to check the second order condition - but of course you can check if you want to.)
(c)(Level A) Now suppose w increases to 2. Find the profit-maximising choice of L. Calculate the profit-maximising output level and the maximised profit. (There is no need to check the second order condition.) You can leave your answers in square roots.
(d)(Level A) What is the change in L when w increases from 1 to 2 in the short run? You can leave your answers in square roots.
Question 2[36 marks]
A mass of consumers is uniformly distributed along the interval 0,1. Two firms, A and B, are located at points 0 and 1 respectively. We denote by p, the price of firm iinA,B. A consumer located at point xin[0,1] obtains utility UA(x)=u-pA-tx2 if he consumes from firm A, and UB(x)=u-pH-t(1-x)2 if he consumes from firm B. In the following, we assume that the groes utility u is sufficiently high, so that the market will be covered and all consumets will get positive utility in equilibrium. Both firms have a cost function equal to Ti(q1)=(1+x)qi, where you should substitute x for the last number of your student ID number.
(a) Find the demand function for both firms.
[5 marks]
(b) Assume firms set their prices simultaneously. Solve for the Nash equilibriuma prices, and compute the equilibrium profits. [6 marks
image text in transcribed

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Database Concepts

Authors: David Kroenke, David Auer, Scott Vandenberg, Robert Yoder

8th Edition

013460153X, 978-0134601533

More Books

Students also viewed these Databases questions

Question

=+3. What are market presence strategies, and which can you name?

Answered: 1 week ago