Question 5:Consider a subsistence economy where only two farms operate. Both farms produce identicalwheat using labour as the only factor of production. Technology of these farms are given as91 = 11-792and92= 19.5-391where 9₁ and 92 are respective outputs of the farms with 1 and 2 the respective units of workersthey hire. Assume that the wheat market is competitive. The price of wheat is 1 while priceof labour is 0.5. a. Assuming the farms owned by different landlords, calculate their equilibrium levels ofoutputs and profits.b. Now assume the farms operate under common ownership. Calculate profits.c. Discuss the results you obtain from parts b and c.

q1 =l10.5-13 q2 q2=l20.5-13 q1 Solving above two equations we get q1 =l10.5-13 l2 0.5 +19 q189 q1…

a. Assuming the farms owned by different landlords, calculate their equilibrium levels of outputs and profits. b. Now assume the farms operate under common ownership. Calculate profits. c. Discuss the results you obtain from parts b and c.

a. Assuming the farms owned by different landlords, calculate their equilibrium levels of outputs and profits. b. Now assume the farms operate under common ownership. Calculate profits. c. Discuss the results you obtain from parts b and c.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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