Question 1: Consider a production function with two inputs, capital (k) and labor (1), given by f(k,l) = kP + IP where p ≤1, p = 0. Price per unit of each input is given by r for capital and w for labor. a. Compute the total cost function C(r, w,q) b. Now suppose p=. Rewrite the total cost function C(r, w, q) for this case. Suppose inverse demand for output is given by p = 2000- Consider the following different industry structures, but each firm in the industry has the same cost curve as in part (b) above. c. Suppose there is only one firm in the industry (monopoly). Find the profit-maximizing output, price, and profit. d. Suppose there are two firms in the industry (duopoly) competing as Cournot oligopolists. Find the profit-maximizing output, price, and profit for each firm. e. Suppose there are four firms in the industry competing as Cournot oligopolists. Find the profit-maximizing output, price, and profit for each firm. f. Compare industry price and total industry profit in each of the above three cases.

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Isocost and Isoprofit Curve Analysis

An isocost curve in the production theory that is a crucial part of economics depicts different combinations of factor inputs at a given market cost. In other words, this shows all the combinations of production factors that cost the same for the firm to employ. Usually, this can be depicted as a downward sloping straight line when the firms act as the price-takers in the factor markets. The slope of this mainly depicts the relative prices of different production factors.