Questions tagged [producer-theory]
Study of the behavior of firms in organizing their production and allocating productive resources.
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1answer
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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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0answers
8 views
How is Aggregate Supply(Willing) equal to National Income(Actual)?
Acc. to definition of Aggregate Supply
It is the total value of final goods and services that the producers are willing to supply in country .
Definition of National Income
It is the value of ...
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0answers
11 views
Is the definition of Investment variable in Economics?
I studied that Investment is the expenditure incurred on the procurement of such goods that would help us in production of goods and services.
And mainly consists of Fixed and Inventory Investment
...
2
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1answer
78 views
Why does a homothetic function have constant ratio of marginal products along rays?
A homothetic ordering is defined as
$x \succeq y \Rightarrow \lambda x \succeq \lambda y \qquad \forall \lambda >0$
where $x,y \in \mathbb{R}^n$
Then, any differentiable function representing ...
1
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1answer
103 views
MICROECONOMICS: Optimal quantity produced in a Perfect Competition Market
Suppose the Total Cost function of a firm in Perfect Competition is
given by: $$C(q) = 450 + 15q + 2q^2$$
The market price is $P = 15$ per unit
Determine the optimal quantity produced by ...
2
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1answer
57 views
How to improve the underperforming construction productivity by correcting its market failures?
Globally, labor-productivity growth in construction has averaged only 1 percent a year over the past two decades, compared with growth of 2.8 percent for the total world economy and 3.6 percent in the ...
0
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1answer
55 views
Consider the following production function $Q=min \left(\frac{L}{2a}, \frac{K}{4b}\right)$. Let $w$ and $r$ be the wage and rental rate respectively [closed]
The cost function associated with this production function is
$A) 2awQ\\
B) 4brQ\\
C) (wa + 2br)Q\\
D) None\; of\; the\; above$
What I have tried is:
We have the cost function $wL+rK=C$.
Since, here, ...
2
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0answers
588 views
How to find the “cost function” given the production function *as well as* the cost per unit produced and the fixed costs?
I'm working on the following homework problem, transcribed verbatim:
A firm has a production function defined as $y = 8L^{1/4}K^{3/4}$. The firm faces costs of \$20 wage, \$60 rental rate of ...
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3answers
994 views
Is it possible to have constant marginal cost and decreasing average cost simultaneously? [closed]
I thought about possibility of occurring such event in the case of presence of fixed costs, but I would like to know others opinions.
0
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1answer
326 views
Are all points on the Long Run Average Cost (LRAC) curve productively efficient?
The definition of productive efficiency is that any given output is produced for the lowest possible cost.
In the short run, only the minimum point on the SRAC curve is productively efficient - this ...
2
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1answer
158 views
Help with this microeconomics exercise
The question:
A price-taking farmer produces a crop with labor L as the only input.
His production function is:$$F(L) = 10L^{1/2} − 2L$$
He has 4 units of labor
in his family and he cannot hire ...
1
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1answer
232 views
Some doubts about netput vectors
I have started studying producer theory on my own and there are some confusions.
We know that a production plan is $y=(y_{1},y_{2},y_{3}....y_{L})$ where $ y_{i} $ is an output if its greater than $0$...
3
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0answers
81 views
Is it possible to derive the marginal product of an input using a transformation function?
I'm using a transformation function $F(\cdot)$ to describe a production set $y = (x, z, L, K)$, where $x$ and $z$ are private goods denoted by positive numbers, $L$ is labour input, $K$ is capital ...
3
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2answers
57 views
Pricing Education
On what basis do colleges/private schools price a given course assuming class size and direct costs are the same?
My current understanding is in my question on private school behaviour regarding the ...
1
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1answer
298 views
What is the meaning of the weights in a CES-production function?
In different paper I offen encounter two types of CES production functions
$y=\left[\left(1-\omega \right) x_{1}^{\frac{\sigma -1}{\sigma}}+ \omega x_{2}^{\frac{\sigma -1}{\sigma}} \right]^{\frac{\...
1
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0answers
56 views
Aggregation in heterogeneous firms models
I am reading the 2014 annual reviews article by Hopenhayn and am struggling to reach the aggregation results he states in the general case of vector of inputs (let's for simplicity assume two inputs, ...
1
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0answers
16 views
Delaying wages in response to slack?
I'm reading a book about the economic development of South Korea during the 'miracle' period.
One of the points the author makes is the following:
A major source of industrial disputes was ...
1
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0answers
652 views
Shape of Isoprofit Curves for Strategic Complements
Two goods are strategic complements if:
$$\frac{\partial \pi_1}{\partial q_2}>0\;\text{and}\;\frac{\partial \pi_2}{\partial q_1}>0$$
The image below is a picture of best response functions and ...
1
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1answer
20 views
Retailer Price Setting for Existing Inventory in the Event of an Increase in Price Paid for the Good
If you are a retailer, and the price you pay for one of your retail goods goes up, how do you price the inventory you already had (which you paid a lower price for)?
Here is an example of a TFD (True,...
11
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4answers
985 views
Are There Giffen Inputs?
I am studying for my candidacy exams and I came across this question on a previous exam. The question is in the TFD (True, False, Debatable) section of the exam. The claim is:
There are no Giffen ...
2
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2answers
95 views
What would make a restaurant offer all-day breakfast?
Some restaurants particularly fast food ones offer breakfast food only during, well, breakfast hours. Other restaurants however offer breakfast food throughout their opening hours. Some restaurants ...
3
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1answer
41 views
Producer's cost for buying full solution vs. buying parts
This may be a very basic question.
From a producer's standpoint, what are the theoretical or empirical results on the comparison of cost between buying assembled or full solutions from suppliers vs. ...
0
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2answers
1k views
Does the contract curve always have to connect the initial points on an edgeworth box? Why or why not?
What if the contract curve goes out of bounds? In that case, do I assume it superimposes itself on the axes it is closest to?
I hope this was clear. Not sure how to explain this other than visually......
3
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2answers
418 views
Why are some goods without close substitutes not sold in some countries?
Especially in consumer electronics, a large number of goods are offered only in some countries. Usually this holds only for products which have some close substitutes available (e.g., screens, where a ...
4
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1answer
187 views
Elasticity of substitution in Jehle and Reny Advanced Micro (3rd ed) exercise 3.8
Letting $f_i(\mathbf{x})=\partial f(\mathbf{x})/\partial x_i$, ($\mathbf{x}$ is a vector, a commodity bundle, and $x_i$ is a scalar, commodity $i$ in the bundle) show that,
$\sigma_{ij}(\mathbf{x})\...
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2answers
483 views
Economic Order Quantity w/ no set up costs
Is it possible to modify the EOQ model to work in a purchasing environment when ordering costs are effectively $0$?
The classic EOQ model is:
$$
Q=\sqrt{2aK/h}
$$
with $a$ being demand, $K$ ordering ...
1
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0answers
260 views
Curvature of Cost and Production Function
I have been trying to understand the duality theory between cost and production function. Please let me know if my following statement is correct;
If the cost function $C(w,q)$ is convex in $q$, the ...
10
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3answers
1k views
CES Production Function with $\rho>1$
In using CES production functions of the form $f(x_1,x_2)=(x_1^\rho+x_2^\rho)^{1/\rho} $, we always assume that $\rho\leq1$. Why do we make that assumption? I understand that if $\rho>1$, the ...
1
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0answers
527 views
Monotonic Transformation
How does positive monotonic transformation of production function effect the resulting profit function?
For example if we had production function $f(x) $ and that gave profit function $\pi(p,w)$. Now ...
3
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1answer
84 views
Homothetic Production Technologies
Can someone suggest a good resource on homothetic technologies and what properties they imply about cost function, profit function, input demands, output supply etc? Also is it possible to have ...
3
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1answer
506 views
Homothetic production function and Profit Function
I know that homothetic production function implies that cost function is multiplicatively separable in input prices and output, and it can be written as
C(w,y)=h(y)C(w,1). Can some one help me derive ...
5
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1answer
62 views
Evidence that open source production processes increase efficiency and/or consumer surplus?
Is there peer reviewed evidence that open source production processes increase efficiency and/or consumer surplus? It seems that the first theorem of welfare economics requires complete markets which ...
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3answers
2k views
Which utility function yields a constant price elasticity of demand function?
How do I know which utility function I can use to find an isoelastic demand function, e.g., $x(p)=Ap^a$?
And similarly, which cost function can I use to find an isoelastic supply function?
Does it ...
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2answers
58 views
What is this economic theory? Cost of investment vs production accounting for time?
I know there has got to be a standard set of theories or formulas to chart this but I don't know how to search for it. Other than a great place like this. :)
I'm a software developer and not an ...
4
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1answer
306 views
Maximisation problem in a multiproduct firm
I am currently reading the book "Microeconomics: Principles and Analysis" by Cowell on my own. I'm interested in the section of the multiproduct firm, but i'm confused with the use of the profit ...
3
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0answers
42 views
How do organisations diversify? Determinants of choosing new target industries
A very weird question I agree.
I am interested in understanding the motives behind firm behaviours of diversification. Why would some firms choose new target sectors/activities?
Is there any ...
5
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2answers
280 views
Is it true that $\frac{dL}{dq}=1/\frac{\partial q}{\partial L}$?
Marginal costs MC is defined as $MC=\frac{dC}{dq}$. Taking into account that $C=wL+rK$,
$$MC=\frac{dC}{dq}=w\frac{dL}{dq}+r\frac{dK}{dq}$$
Recall that marginal product of labor $MP_{L}=\frac{\...
0
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1answer
101 views
Minimization of costs combination of factors of production
Given the production function $D(x,y,z)=\min\{2x, \left( 2y+4z\right)\}$, and knowing that P-price $P_x=30,P_y=20,P_z=5$ and volume of production $D=200$. How much of x,y and z is needed to minimize ...
1
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1answer
43 views
Substitutive or supportive factors of production
Given the function:
$y=A K^\alpha L^\beta, A,\alpha,\beta >0$
$y=aK+bL^{0.5}, a,b>0$
Decide whether capital and labour are substitute or supportive factors of production. How to solve this ...
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0answers
203 views
Given Cobb-Douglas production functions for 2 factories (same owner), how will the owner produce $y$?
So my question is this:
A company owns two factories, A and B, each with the following production functions:
$f_A(x_1,x_2)=x_1^{\alpha}x_2^{1-\alpha}$
$f_B(x_1,x_2)=x_1^{\beta}x_2^{1-\beta}$
Now ...
4
votes
1answer
16k views
Equilibrium price and quantity - consumer and producer surplus
Inverse function of market demand for certain good is equal to $P=100-0.25Q$, inverse supply function is $P=20+0.55Q$. Calculate equilibrium price and quantity. Furthermore calculate consumer and ...
4
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2answers
2k views
Monopoly pricing under constant elasticity of demand
While reading Ch. 24-Monopoly from Intermediate Microeconomics by Hal Varian (8 th edition), on pg. 441, he writes that a monopolist will never choose to operate where the demand curve is inelastic. I ...
2
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0answers
151 views
undergrad Producer theory problem [closed]
Two commodities, X and Y, are produced with identical technology and are
sold in competitive markets. One unit of labour can produce one unit of each of
the two commodities. Labour is the only ...
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0answers
137 views
Finding the result when Demand is not given within an Economic Order Quantity question?
I recently came across the following problem on a set of past examination papers for a university module I'm currently taking:
'A video manufacturer produces 8500 video recorders on a continuous
...
2
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1answer
166 views
Find Variable Cost per Unit
I am trying to do this problem, and I am not getting the answer.
I need to find the fixed cost of system 1, and system 2.
I know that the fixed cost will be the y-intercept of the equation.
Fixed ...
