Calculate the first-order condition for the firm problem

Assignment Help Business Economics

Reference no: EM131094486

A firm uses two inputs, X and Y and its production function is Q =root(xy), where here we are using x and y to represent the quantities of the two inputs.

Assume that the demand for the firm’s product is QD = 24 -4P, where P is measured in dollars. The firm has no control over the exogenous prices of its inputs, px>0 and py>0. The firm’s problem is to choose x and y to maximize its profit.

(g) Calculate the first-order condition for the firm’s problem.

(h) What are the boundary points of this problem? Under what conditions would the firm choose a boundary point? Be as specific as possible about which boundary point the firm would choose.

(i) Assuming that the solution occurs at a point that satisfies the first-order condition, find four equations that determine the solution to the firm’s problem. The four unknowns are x, y, Q, and P.

Reference no: EM131094486

Questions Cloud

What is the implication of this fact for dispersion of wages : Most empirical studies find that people with more formal education than others also in general tend to receive more on-the-job training during their careers. Why do you think this is true? What is the implication of this fact for the dispersion of wa..

Rules based on culture-religious codes-societal constraints : But what about the unwritten or informal rules of doing business there—rules based on culture, religious codes, and societal constraints? Sometimes these laws can be very different from those in one’s home country or in other countries in which one i..

Calculate total cost of revised system with two service crew : A crew of mechanics at the Highway Department garage repair vehicles that break down at an average of λ = 8 vehicles per day (approximately Poisson in nature). The mechanic crew can service an average of μ= 11 vehicles per day with a repair time dist..

What is the real sector of the economy : Submit the answers to to the following questions in the unit 8 drop box. You must explain your answer and provide your supporting computations. Why do we have a reason to expect that market forces will keep prices (adjusted for exchange rates) the sa..

Calculate the first-order condition for the firm problem : A firm uses two inputs, X and Y and its production function is Q =root(xy), where here we are using x and y to represent the quantities of the two inputs. Calculate the first-order condition for the firm’s problem. What are the boundary points of thi..

What is the price and quantity of the monopolist : A monopolist sells a single product on a market where inverse demand for the output Q, is p=500-Q, where p is price. The monopolist has a marginal (and average) cost of production of 40 per unit. The monopolist charges its profit maximizing price. Wh..

Refused to pay on ground that the policy required : Helen obtained an insurance policy insuring her life and naming her niece Julie as beneficiary. Helen died, and about a year later the policy was found in her house. When Julie claimed the insurance money, the insurer refused to pay on the ground tha..

Analyze how trends impact the organizational strategy : Analyze how trends impact the organizational strategy of Procter & Gamble. Evaluate the context of the global market, including sensitivity to economic and cultural diversity, for the impact on an organization's strategy. Evaluate leading edge or con..

Considering franchising its unique brand of crepes : Crepe Creations is considering franchising its unique brand of crepes to stall-holders on Hermoza Beach, which is five miles long. How many franchises should now be awarded if we make the standard assumption that the effort costs of the stall holders..

User Account

All Pages