Problem 1: Winter melons A farmer is using land and fertilizer to produce winter melons. The production function is q = L√F. The price of one unit of land is 3, the price of unit of fertilizer is 1. The farmer is currently using 4 units of land and 4 units of fertilizer. b) Suppose now that the farmer cannot modify the amount of land but can modify the amount of fertilizer. Write the cost function. c) The farmer can bring the winter melons to a market and sell them at price 1. Find the optimal quantity to produce. Show that the profit is negative. d) Suppose that now the farmer can buy more land. Do you think that, after buying sufficiently many units of land, the farmer can eventually make a positive profit on the market?

Problem 1: Winter melons A farmer is using land and fertilizer to produce winter melons. The production function is q = L√F. The price of one unit of land is 3, the price of unit of fertilizer is 1. The farmer is currently using 4 units of land and 4 units of fertilizer. b) Suppose now that the farmer cannot modify the amount of land but can modify the amount of fertilizer. Write the cost function. c) The farmer can bring the winter melons to a market and sell them at price 1. Find the optimal quantity to produce. Show that the profit is negative. d) Suppose that now the farmer can buy more land. Do you think that, after buying sufficiently many units of land, the farmer can eventually make a positive profit on the market?

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter7: Production, Inputs, And Cost: Building Blocks For Supply Analysis

Section: Chapter Questions

Problem 8TY

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