2. Suppose that a perfectly competitive firm uses two inputs to produce one output. Theconditional factor demand functions for this firm are as follows:x1(W1, W2, y) = (2w2/w;)/3y*/3x2(W1, W2, y) = (w1/2w2)²/3y4/3a) Find the cost function.b) Using the cost function, setup the firm's profit maximization problem and find thesupply function.c) Using the supply function, derive the factor demand functions.

We will use profit maximisation and substitution methods to answer this question.

2. Suppose that a perfectly competitive firm uses two inputs to produce one output. The conditional factor demand functions for this firm are as follows: x1(W1, W2, y) = (2w2/w;)/3y*/3 x2(w1, W2, y) = (w,/2w2)2/3y+/3 a) Find the cost function. b) Using the cost function, setup the firm's profit maximization problem and find the supply function. c) Using the supply function, derive the factor demand functions.

2. Suppose that a perfectly competitive firm uses two inputs to produce one output. The conditional factor demand functions for this firm are as follows: x1(W1, W2, y) = (2w2/w;)/3y*/3 x2(w1, W2, y) = (w,/2w2)2/3y+/3 a) Find the cost function. b) Using the cost function, setup the firm's profit maximization problem and find the supply function. c) Using the supply function, derive the factor demand functions.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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