# Questions tagged [producer-theory]

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

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### Why are cost functions often assumed to be convex in microeconomics?

Why are cost functions typically assumed to be convex in producer theory of (introductory) microeconomics? For me this goes against the intuition of economies of scale. There are fixed costs (FC) ...
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### Why does LRAC not connect the minima of SRAC curves? [duplicate]

Can anyone please provide an intuitive explanation and proper mathematical reason for non-intersection of SRAC and LRAC at the minimas of SRAC? I am seeing conflicting [1] [2] answers on the site ...
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### Interior Solution for profit maximisation problem

A function $c: \mathbb{R}^K_+ \xrightarrow{} \mathbb{R}_+$ is is said to be a cost function if The value of function $c$ at $y = \textbf{0}$ is $0$: $c(\textbf{0}) = 0$ $c$ is continuous on the ...
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### Walras Law in a production economy with fixed costs

Consider a price taking firm with fixed costs $fc \geq 0$: \begin{align*} \Pi &= \max_{n^D} \left\{ P_c F(n^D) - w\times n^D - fc \right\} \end{align*} A representative household owns this firm:...
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### Properties on conditional demand correspondence from the textbook of Mas-Colell et al

I have a question on the properties of conditional demand correspondence Let $z(w,q)$ be the conditional factor demand correspondence, i.e. the solution of the cost minimization problem \begin{align} \...
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### If production function is concave, then demonstrate that profit function will also be concave

Show that concavity of firm's production function implies concavity of its profit function. (Hint: For a concave function, first order conditions gives the vector that maximizes the function) ...
251 views

### Why was activity analysis abanadoned as a field of research?

Activity analysis was a thriving research area in the 1940's and 1950's. It was fruitful enough to earn the Nobel prize for Tjalling Koopmans. But it seems to have been abandoned altogether. Mas ...
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### The existence of solution for profit maximization problem

I'm thinking about the conditions for existence of solution of this profit maximization problem(PMP), i.e., $\max_{z \in R_+^{K-1}} pf(z) -wz$, where $z \geq 0$: input vector, $p>0$: the price of ...
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### 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 ...
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### 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 ...
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### 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 ...
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### 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 ...
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### 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 ...
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 ...