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Question # 00000828 Posted By: step4 Updated on: 09/08/2013 10:42 AM Due on: 09/17/2013
Subject Economics Topic General Economics Tutorials:
Question
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Consider a single-product firm under monopoly. The firm's profit function is given by ? = PQ-wL-rK, where P=price, Q=output, L=labor, K=capital, w=wage, and r=rent.

Let the market demand function and the firm's production function be Q=PQ=P-2 and Q=K raised to the power (4/5)*L raised to the power (4/5), respectively.

(a) Is the production function homogeneous? If so, of what degree? Discuss the returns to scale for this function.
(b) Is the production concave? Is it quasiconcave? Show your work.
(c) Rewrite the profit function as a function of L and K. Is it homogeneous with respect to L & K? If so, of what degree?
(d) Is the profit function concave in L &K? Is it quasiconcave? Show your work.
(e) What would happen if this function pertained to a perfect competition instead of a monopoly?

Additional Requirements

Min Pages: 1
Level of Detail: Show all work
Other Requirements: Production Function: Q=K?4/5L?4/5

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Tutorials for this Question
  1. Tutorial # 00000695 Posted By: mac123 Posted on: 09/08/2013 10:45 AM
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