Production function-firm buys input in competitive market

Assignment Help Business Economics

Reference no: EM13862558

A firm has the production function x = f (L) , where x is output and L is labor input. The firm buys the input in a competitive market.

(a) Assuming the firm sells its output in a competitive market, show that setting output where price equals marginal cost is equivalent to setting labor input where input price equals marginal value product.

(b) Assuming the firm is a monopoly, show that setting output where marginal revenue equals marginal cost is equivalent to setting labor input where input price equals marginal-revenue product.

(c) What restriction do we have to impose on the production function to ensure the second-order conditions in problems (a) and (b) are satisfied?

Reference no: EM13862558

Questions Cloud

Subscribed for shares and sustained loss : Ajeet promised shares issued by Flordia Ltd. The prospectus of Flordia Ltd. included a statement which was misrepresentative in the forms and contents. On the faith of the prospectus believing it to be a true, Ajeet subscribed for shares and sustaine..

Derive the material indices for minimizing cost : Identify the function, constraints, objective and free variables for the leaf spring design. Derive the material indices for minimizing cost and mass of material for the identified constraints

Other income redistribution programs and policies : Compare and contrast the Swedish and American approaches to welfare and other income redistribution programs and policies.

Directaccess and remote access benefits : DirectAccess and Remote Access Benefits

Production function-firm buys input in competitive market : A firm has the production function x = f (L) , where x is output and L is labor input. The firm buys the input in a competitive market. Assuming the firm sells its output in a competitive market, show that setting output where price equals marginal c..

Hiv/aids drugs developed and manufactured by company : Your management team is part of a pharmaceutical company that has been subpoenaed by Congress to testify about the company's decision to oppose the granting of compulsory licensing by the World Trade Organization to Kenya with respect to HIV/AIDS dru..

Savings-investment and the interest rate : Suppose a closed economy decides to lower taxes (assume Ricardian equivalence does not hold), all else held constant. What will happen to savings, investment, and the interest rate? Show graphically what happens (be sure to label curves, axes, equili..

Find profit-maximizing price-quantity of input monopsonist : Where p is the input price, and a, b, α, β > 0. Find the profit-maximizing price and quantity of the input the monopsonist will choose, and compare the analysis to that of the profit-maximizing monopoly

Principles of information systems in business : Briefly discuss two important concepts from Principles of Information Systems in Business and Organization with emphasis in the business management degrees

User Account

All Pages