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Question # 00000828
Subject: Economics
Topic: General Economics
Due on: 09/17/2013
Posted On: 09/08/2013 10:42 AM

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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?

.5em;="" "open="">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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