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Study of the behavior of firms in organizing their production and allocating productive resources.
3
votes
Accepted
Why was activity analysis abanadoned as a field of research?
In Farrell, M. J. (1957). The measurement of productive efficiency. Journal of the Royal Statistical Society: Series A (General), 120(3), 253-281.
which is widely seen as the starting point of system …
0
votes
Accepted
Economic Order Quantity w/ no set up costs
With ordering costs equal to zero, one has only to optimize holding costs.
Since total holding costs are
$$TC_h=\frac {hQ}{2}$$
it is monotonically decreasing in $Q$. $Q$ may be constrained, say,
…
0
votes
Accepted
Consider the following production function $Q=min \left(\frac{L}{2a}, \frac{K}{4b}\right)$. ...
The steps to optimally go from the Production function to the Cost function is to solve the cost-minimization problem for the firm, which determines the input mix given prices and some level of output …
1
vote
Accepted
Monopoly pricing under constant elasticity of demand
In this post you can find the algebraic steps that lead to the (standard) result mentioned in Varian's book.
Now, let's assume that, in a specific market, the consumer's preferences are such that t …
1
vote
Accepted
Minimization of costs combination of factors of production
Working with $\min$ (or $\max$) functions can be tricky, especially if one wants to write down the general solution in a fully rigorous way.
But in your case you have simple linear functions and a n …
3
votes
Accepted
Why does a homothetic function have constant ratio of marginal products along rays?
A homothetic function can be characterized as follows:
Let $f(\mathbf x)$, $\mathbf x \in \mathbb R^n$ be a function homogeneous of degree $r$. Let $g()$ be a function with $g'\neq 0$. Then
$$G(\mat …
7
votes
Is it true that $\frac{dL}{dq}=1/\frac{\partial q}{\partial L}$?
Question: is the following correct ?
$$\frac{dL}{dq}=1/\frac{\partial q}{\partial L},\;\frac{dK}{dq}=1/\frac{\partial q}{\partial K}$$
In general, no. Since $q= f(L,K)$ is a multivariable, s …
1
vote
What is this economic theory? Cost of investment vs production accounting for time?
This is perhaps a bit more complex than you might suspect. Let $F(q), F'>0$ the fixed (setup) cost, which is a positive function of the productive capacity, which here is represented by actual product …
-1
votes
If production function is concave, then demonstrate that profit function will also be concave
The "hint" is wrong and misleading.
It is wrong, because first-order conditions are sufficient for a maximum when the objective function is strictly concave, or at least strictly-quasi-concave, under …
3
votes
Accepted
Which utility function yields a constant price elasticity of demand function?
By Roy's Identity we have that Marshallian (uncompensated) demand for good $x_i$ is
$$x_i^M = \frac {\partial U^*/\partial p_i}{\partial U^*/\partial B} \tag{1}$$
where $U^*$ is optimized utility ov …
1
vote
Accepted
Equilibrium price and quantity - consumer and producer surplus
Equating supply and demand we obtain the equilibrium
$$P^* = 75, Q^*=100$$
The corresponding diagram is
Consumer Surplus is the area of triangle $B-E-C$ so
$$CS = \frac 12 \cdot (100-75)\cdot 100 …