Question: A common functional form in production theory is the CES (constant elasticity of substitution) function In this case the competitive firm's cost minimization problem is

A common functional form in production theory is the CES (constant elasticity of substitution) function
A common functional form in production theory is the CES

In this case the competitive firm's cost minimization problem is

A common functional form in production theory is the CES

subject to f(x) = (a1xp1 + a2xp2)1/p = y

min wixi+w2x2 x1,x2

Step by Step Solution

★★★★★

3.34 Rating (148 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock

The Lagrangean is x 1 1 2 2 1 2 The necessary ... View full answer

blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Document Format (1 attachment)

Word file Icon

914-M-N-A-O (778).docx

120 KBs Word File

Students Have Also Explored These Related Numerical Analysis Questions!

Q:

A conventional assumption in production theory is free disposal, namely y Y y Y for every y x where x > x means that xi >...

Q:

Is the CES function pseudoconcave? f(x) = (21xf + a2x Xi > 0, p +0

Q:

A common decision is whether a company should buy equipment and produce a product in house or outsource production to another company. If sales volume is high enough, then by producing in house, the...

Q:

Two articles will be attached below in order to understand the question given. The main effects of Regulation Q Restrictions and technological changes on the scale economies for commercial banks. In...

Q:

7. (16 marks) Consider the general two-input constant elasticity of substitution (CES) production function Q(L, K)-AI8L-P+(1 - 6)K-P Pwhere L >0 is labour input, K>0 is capital input, A >0 is the...

Q:

4. Marshall's Rules of Derived Demand (Chapter 3) We will now prove the first three of Marshall's rules of derived demand and, in doing so, also derive a Slutsky-type equation that decomposes the...

Q:

Consider a standard Solow growth model in continuous time with no population or tech- nological growth (i.e. the one from the lecture with n = g = 0). As seen in the lecture, the equilibrium of that...

Q:

Pre-mixed concrete is an important input for the construction industry. Concrete cannot be stored or transported over long distances as it begins to set after only a few hours. For this reason, only...

Q:

1. A firm's cost minimization problem is given by min w.x subject to x e V(y) where x is the vector of factor inputs, w is the price vector of the factors, and V(y) is the input requirement set for a...

Q:

Ajax Limited and Brutus, LLC. are the only suppliers of services that calibrate the send/receive GPS tracking equipment on trucks that are used by various trucking companies to monitor their shipping...

Q:

The table shows this year's nominal GDP and the price level. If nominal GDP increases by 2 percent and the price level goes up by 3 percent next year, calculate next year's nominal GDP, price level,...

Q:

What are the advantages and disadvantages of decentralizing the wage and salary function of an organization? How could this be accomplished?

Q:

Krell Industries has a share price of $ 2 2 . 4 2 today. If Krell is expected to pay a dividend of $ 1 . 1 5 this year and its stock price is expected to grow to $ 2 4 . 1 4 at the end of the year ,...

Q:

12. A soil scientist is considering the effect of soil pH level (factor A) on the breakdown of a pesticide residue. Two pH levels are considered in the study. Because pesticide residue breakdown is...

Q:

A machinist is required to manufacture a circular metal disk with area 1000 cm2. (a) What radius produces such a disk? (b) If the machinist is allowed an error tolerance of 5 cm2 in the area of the...

Q:

A crystal growth furnace is used in research to determine how best to manufacture crystals used in electronic components for the space shuttle. For proper growth of the crystal, the temperature must...

Q:

Prove the statement using the ε, δ definition of limit and illustrate with a diagram like Figure 9. 16. lim (x + 3) = 2 15. lim (2x + 3) = 5 --2 17. lim (1 - 4x) 18. lim (7 - 3x) = -5 =...

Q:

Could you please help me answer these questions? Thank you! Show your work and use the table (on slide 20) as needed to say whether the hypothesis was supported or rejected and why. Problem 1: We...

Q:

The IRR evaluation method assumes that cash flows from the project are reinvested at the same rate equal to the IRR. However, in reality the reinvested cash flows may not necessarily generate a...

Q:

An office in Albuquerque has 24 workers including management. Eight of the workers commute to work from the west side of the Rio Grande River. Suppose six of the office workers are randomly selected....