Consider Delta, a price-taking single-output, single input firm with the following production function: f (z) = z4/5 a) Define non decreasing returns to scale and non-increasing returns to scale in terms of the production function and give conditions under which f(z) satisfies these properties. b) Suppose that the price of the input z is ѿ =1. Set up the cost minimization problem and solve for the conditional factor demand correspondence and the cost function. c) Set up Delta's profit maximization problem using the cost function you derived in (b) above and solve for the supply correspondence and the profit function.
Consider Delta, a price-taking single-output, single input firm with the following production function: f (z) = z4/5 a) Define non decreasing returns to scale and non-increasing returns to scale in terms of the production function and give conditions under which f(z) satisfies these properties. b) Suppose that the price of the input z is ѿ =1. Set up the cost minimization problem and solve for the conditional factor demand correspondence and the cost function. c) Set up Delta's profit maximization problem using the cost function you derived in (b) above and solve for the supply correspondence and the profit function.
Chapter10: Cost Functions
Section: Chapter Questions
Problem 10.6P
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Question
Consider Delta, a
f (z) = z4/5
a) Define non decreasing returns to scale and non-increasing returns to scale in terms of the production function and give conditions under which f(z) satisfies these properties.
b) Suppose that the price of the input z is ѿ =1. Set up the cost minimization problem and solve for the conditional factor
c) Set up Delta's profit maximization problem using the cost function you derived in (b) above and solve for the supply correspondence and the profit function.
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