Problem 1: Short-Run Profit Maximization [10 points] Consider a firm that uses both capital (K) and labour (L) to produce a final product (Q) that it sells at the market price $5. The firm buys Labour at a cost of $4 per unit and capital at a cost of $10 per unit. The firm is […]
Tag Archives: Maximization
Show and explain the situation in which a profit maximizing, perfectly competitive firm is earning a positive economic profit.
Economic profit maximization Graph the profit maximization for a perfectly competitive firm. Show equilibrium profit and quantity. Show and explain the situation in which a profit maximizing, perfectly competitive firm is earning a positive economic profit. Be sure to label the profit maximizing level of output and shade in the area that represents profit. Show […]
What can you say about the role played by the probability it in this condition?
Suppose the taxpayer is an expected utility maximizer with strictly increasing Bernoulli utility function u(W), where W is final wealth. Write down the corre-sponding maximization problem. Characterize the optimal solution, x, to the maximization problem in b. Be careful with both bounds, 0 and y. Provide a condition under which x = 0 is a […]
Explain how a demand curve can be derived by observing the outcomes of price changes in the utility-maximization model.
Course: Principles of Microeconomics Module 3: Consumer Behavior Goals After completing this module, you will be able to do the following: Discuss price elasticity of demand and how it is calculated. Explain the usefulness of the total revenue test for price elasticity of demand. List the factors that affect price elasticity of demand and describe […]
