Question

1. Q2(a) A monopolist has a production function ?=?(?,?)=2∗(??)0.5 with ?=?=1 (input markets are competitive, as normal). For parts (a)-(c), she faces a single-price demand curve ?=5−?.

        a. Construct the monopolist’s cost function and find marginal cost. (Hint: MC should be constant.)

Answer 1

2.

a.

We have production function:

Cost = wl + vk = l + k

Cost minimizing condition is:

MRTS = Input price ratio

gives: k = l

Using this in production function, we get:

Cost function can be calculated as:

Marginal cost is given as:

Have a nice day ahead!

answered by: anonymous