4. A two-output-two-input firm has a transformation function of the type: 91 +92= where qi and q2 are outputs and z₁ and 22 are inputs. (a) Is this production function consistent with non-increasing returns to scale? Explain why or why not. (b) Fix 2₁ = 1 and 2 = 1. Draw the transformation function between q₁ and 92. (c) Fix q₁q=1. Draw the transformation function (isoquant) for inputs 2₁ and 2₂. (d) Find profit maximising 21.22.41.92 at prices equal to: p1 = 1, P2 maximisation problem, think about your picture in (b). With a transformation frontier of this form and such prices, does the firm = 2 and ₁= 1, ₂= 2. Hint: before you set up the profit produce both outputs? If not, rephrase the maximisation problem accordingly.

4. A two-output-two-input firm has a transformation function of the type: 91 +92= where qi and q2 are outputs and z₁ and 22 are inputs. (a) Is this production function consistent with non-increasing returns to scale? Explain why or why not. (b) Fix 2₁ = 1 and 2 = 1. Draw the transformation function between q₁ and 92. (c) Fix q₁q=1. Draw the transformation function (isoquant) for inputs 2₁ and 2₂. (d) Find profit maximising 21.22.41.92 at prices equal to: p1 = 1, P2 maximisation problem, think about your picture in (b). With a transformation frontier of this form and such prices, does the firm = 2 and ₁= 1, ₂= 2. Hint: before you set up the profit produce both outputs? If not, rephrase the maximisation problem accordingly.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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