A firm produces output y from inputs x1 and x2 whose prices are given as w1 = 1 and w2 = 1 respectively. The production function is y = x11/2 x21/2 a) Write the Lagrangian function b) Find the firm’s cost function

A firm produces output y from inputs x1 and x2 whose prices are given as w1 = 1 and w2 = 1 respectively. The production function is y = x11/2 x21/2 a) Write the Lagrangian function b) Find the firm’s cost function

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter10: Cost Functions

Section: Chapter Questions

Problem 10.6P

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A firm produces output y from inputs x₁ and x₂ whose prices are given as w₁ = 1 and w₂ = 1 respectively. The production function is y = x₁^1/2 x₂^1/2

a) Write the Lagrangian function

b) Find the firm’s cost function

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