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Suppose that a rm has cost function C (q, mm) : v1/2w1/2 2. a) Suppose the rm sells their good on a competitive market, where
Suppose that a rm has cost function C (q, mm) : v1/2w1/2 2. a) Suppose the rm sells their good on a competitive market, where the price of their good is $10. How much do they produce? Note: The answer will be a function of 'U and w. b) Solve for the rm's contingent demand functions for labor and capital. c) Solve for the firm's unconditional demand functions for labor capital, using the fact that l(p, 'U, 11)) : lc(p,v,w) and Mp, 1), w) : kc(p, v,w). d) Solve numerically for quantity produced and labor and capital demanded when U : 1, 1021. e) What happens to quantity produced and labor and capital demanded when 1) increases to 4
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