1. Suppose that a firm has two machines with different production technologies: 0.60.4 f(r1,r2) = 3T+2/T and g(F1, 12) = . %3D The factor prices are wi = 3 and wa = 2. (a) Derive the cost functions cf and c, for machines f and g, respectively. (b) If the firm can use only one of the machines at a time, which machine will be used? (c) If the firm can run both machines at the same time, how will it organise its production? Derive the firm's cost function c. (Hint: Express the firm's cost as k(m, n) = cr(m) + c, (n) when it is producing q= m+n units, where f is used to produce m units, and g is used to produce n units.) (d) Suppose now that the second technology has a fixed cost of 20, so the cost function C. has an extra 20 in addition to what it used to be. (This fixed cost is incurred

1. Suppose that a firm has two machines with different production technologies: 0.60.4 f(r1,r2) = 3T+2/T and g(F1, 12) = . %3D The factor prices are wi = 3 and wa = 2. (a) Derive the cost functions cf and c, for machines f and g, respectively. (b) If the firm can use only one of the machines at a time, which machine will be used? (c) If the firm can run both machines at the same time, how will it organise its production? Derive the firm's cost function c. (Hint: Express the firm's cost as k(m, n) = cr(m) + c, (n) when it is producing q= m+n units, where f is used to produce m units, and g is used to produce n units.) (d) Suppose now that the second technology has a fixed cost of 20, so the cost function C. has an extra 20 in addition to what it used to be. (This fixed cost is incurred

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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