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

3 votes
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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 …
Alecos Papadopoulos's user avatar
0 votes
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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, …
Alecos Papadopoulos's user avatar
0 votes
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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 …
Alecos Papadopoulos's user avatar
1 vote
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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 …
Alecos Papadopoulos's user avatar
1 vote
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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 …
Alecos Papadopoulos's user avatar
3 votes
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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 …
Alecos Papadopoulos's user avatar
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 …
Alecos Papadopoulos's user avatar
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 …
Alecos Papadopoulos's user avatar
-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 …
Alecos Papadopoulos's user avatar
3 votes
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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 …
Alecos Papadopoulos's user avatar
1 vote
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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 …
Alecos Papadopoulos's user avatar