# Questions tagged [producer-theory]

Study of the behavior of firms in organizing their production and allocating productive resources.

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### Economics of Christmas Trees and Interest Rates

True/False: If Christmas tree growers harvest and market their trees at earlier ages, one possible explanation is that interest rates have fallen. My Intuition is that the interest rate represents ...
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1 vote
35 views

### Why is the demand curve that a perfectly competitive firm faces horizontal while the market demand curve is negatively sloped?

I'm studying producer-theory and I'm stuck on this. Maybe I'm missing something important, but if the demand curve facing a firm in a perfectly competitive market is the same as the market demand ...
1 vote
36 views

### Why free disposal assumption needed in Prop 5.C.1 and 5.C.2 in MWG?

I'm a little confused as why we needs only the assumption of Y being closed and satisfies free disposal in the MWG prop 5.C.1 and 5.C.2. I think i know why Y needs to be closed but what about free ...
1 vote
63 views

### If a production function is homothetic, the MRTS is the ratio of the inputs used. But is the converse also true?

We know that when a production function is homothetic, the MRTS is constant along the ray through the origin (it is a ratio of the inputs used). But is it true that if the MRTS is ratio of the inputs ...
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### How to aggregate goods with different units of measurement to reduce the economy with a Cobb Douglas utility function?

I want to model a economy where consumers have a Cobb Douglas utility function and where X1 = goods that pay a value added TAX (VAT), and X2 = goods that are exempt from this tax. I am working with ...
1 vote
136 views

### Negative marginal utility and negative marginal product

In microeconomics, we usually 'allow' utility functions with negative partial derivatives, indicating a 'bad' commodity, such as $u(x,y)=x^2-y$. Naturally, a utility-maximising consumer with a usual ...
1 vote
67 views

### Slope of isoquants

Consider a production function $f(L,K)=\sqrt{KL}$. The |MRTS|=$K/L$, and $\frac{d|MRTS|}{dl}=\frac{-K}{L^2}$ However, if I use the expression given in Nicholson and Snyder (Microeconomic Theory, ...
1 vote
109 views

### Intertemporal profit maximization

Assume a producer wishes to maximize the net present value, choosing optimal quantities of K and L. variables are time dependent. y is the production function, p is the price of y. K is capital, r is ...
• 31
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### why are there heterogenous prices fixed for every unit of output

everyone says that it is because a monopoly decides the market's output, prices fixed per unit of the same keep decreasing. question: if the firm has the ability to influence market prices, why would ...
1 vote
55 views

### Global returns to scale

I have a production function of the form $f(x_1,x_2) = x_1^a x_2^b$ and I am trying to figure out what the global returns to scale would be given that $a,b \in (0,1)$. This production function is ...
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981 views

### How to derive the input demand functions from a perfect substitutes production function

I am struggling to derive the input demand functions from a production function with inputs that are perfect substitutes. The production function is as follows: $f(x_1,x_2) = (x_1+x_2)^\frac{1}{2}$ I ...
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1 vote
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### Quasi fixed costs - two technologies

If a firm has the choice of using two production technologies to produce the same output: A, featuring a quasi-fixed cost of 50 (i.e. 50 for all q > 0, 0 when q = 0), then a variable cost of 5q B, ...
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1 vote
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### Do property values capture producer choice in agriculture?

I am interested in conducting research into how climate change impacts the social welfare of a country, particularly how it affects producers of agricultural product. My immediate thought was that as ...
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### Perfectly elastic supply

How would you algebraically write a perfectly elastic supply? Will it be infinite at price = 4? (The choice of the number 4 is completely arbitrary)
1 vote
64 views

### Value Function For Durable-Good Monopolist with General Distribution

It is known that with a unit mass of consumers, each of whom has a value distributed between 0 and 1, one can think of the monopolist solving $$\max_{p} \ p[1-F(p)]$$ when ...
41 views

### How can i determine the homogeneity degree of Stone Gaery function? [closed]

I dont know how to demonstrate homogeneity degree of this function $(X-\alpha)^{\beta}(Y)^{1-\beta}$ Any idea? Thanks.
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115 views

### Intermediate Case of Bertrand and Cournot

I am wondering whether there is a model of oligopolies in which we have some intermediate case of Bertrand and Cournot competition. What I do not mean by "intermediate" is the mixed Bertrand - Cournot ...
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### Finding long run equilibrium price, quantity and number of firms with a linear average cost function

I've been been brushing up on my micoreocnomics lately and I came across a question in Perloff that looked really simple, but for some reason I am struggling to answer: Assume we are in the long run ...
• 305
189 views

### Changing Constant Factor Demands

I’ve been given this true false question: Consider the minimization of wL + rK given F(K, L) $\geq$ Q with F(K, L) strictly increasing in K and L. The conditional factor demands K*(Q, w, r) and L*(Q, ...
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