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5. Let the firm's production function be given by y=x1+x2. Suppose w1=2 and w2=1 (a) Derive the conditional factor demands and use them to find the long-run cost function for this firm. (b) For these factor prices, derive and graph the firm's long-run supply curve. (c) Suppose the price of the second input, w2, rises to $2 per unit. What is the long-run cost curve? Derive and graph the new supply curve..

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5. Let the firm's production function be given by y=x1+x2. Suppose w1=2 and w2=1 (a) Derive the conditional factor demands and use them to find the long-run cost function for this firm. (b) For these factor prices, derive and graph the firm's long-run supply curve. (c) Suppose the price of the second input, w2, rises to $2 per unit. What is the long-run cost curve? Derive and graph the new supply curve.

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5 Let the firms production function be given by yx1+x2 S.pdf

  • 1. 5. Let the firm's production function be given by y=x1+x2. Suppose w1=2 and w2=1 (a) Derive the conditional factor demands and use them to find the long-run cost function for this firm. (b) For these factor prices, derive and graph the firm's long-run supply curve. (c) Suppose the price of the second input, w2, rises to $2 per unit. What is the long-run cost curve? Derive and graph the new supply curve.