Question: ( 2 0 pts ) Consider a central authority who operates J firms with differentiable convex cost functions c j ( q j ) for
pts Consider a central authority who operates firms with differentiable convex cost functions for producing good from the numeraire. Define to be the central authority's minimized cost level for producing aggregate quantity ; that is
a pts Derive the firstorder conditions for this costminimization problem.
b pts Show that at the costminimizing production allocation dots, for all with ie the central authority's marginal cost at aggregate output level equals each firm's marginal cost level at the optimal production allocation for producing
c pts Show that if firms all maximize profit facing output price with the price of the numeraire equal to then the consequent output choices result in an aggregate output of Conclude that is the inverse of the industry supply function
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