Consider a perfectly competitive ï¬rm that produces output using a wellbehaved production function y = f(x1,x2)....

90.2K

Verified Solution

Question

Economics

Consider a perfectly competitive ï¬rm that produces output usinga wellbehaved production function y = f(x1,x2). Let the price ofoutput be denoted by p, the price of input 1 be denoted by w1, andthe price of input 2 be denoted by w2.
(a) State the ï¬rmâ€™s cost-minimization problem, and draw thesolution to the cost minimization problem on a graph.
(b) What are the solutions to the cost-minimization problem? Whatare these solutions called? Which variables are these solutions afunction of?
(c) Which 2 conditions must be satisï¬ed for an input bundle to beconsidered cost minimizing, assuming an interior solution? Why?Explain your answer.
(d) Derive the ï¬rmâ€™s cost function. What role do your answers inpart (b) play in deriving the cost function?

Answer & Explanation Solved by verified expert

3.6 Ratings (565 Votes)

Acceoding to the given informations the perfectly competitiverm that produces output using a well behaved production function y fx1x2 Let the price of output be denoted by p the price ofinput 1 be denoted by w1 and the price of input 2 be denoted byw2a The cost of producing x1 units of input 1 is w1x1 and thecost of producing x2 units of input 2 is w2x2Hence total cost of production isC See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Consider a perfectly competitive ï¬rm that produces output using a wellbehaved production function y = f(x1,x2)....