question archive Firm B has N inputs: G1, G2,
Firm B has N inputs: G1, G2,
Subject:EconomicsPrice: Bought3
Firm B has N inputs: G1, G2, ...GN-1, Gn. We can denote the i'th input as G. The cost to rent/hire the i’th input is qi. The firm has Cobb-Douglas Production Function, where the power coefficient for each i'th input is li. The price of output is p, and the firm makes Y units of output. The firm has to pay for all inputs, however, all inputs except for G are fixed. This means the firm only chooses G1 1. Formulate and solve the profit maximization problem (20 points) 2. Although we can't change G2, what is the elasticity of optimal G choice with respect to G ? What is the elasticity of optimal G choice with respect to q2? (20 points) 3. When G? increases from 1 to e, the log of output increases by }. What is Az? (Remember that when we say log we mean natural log in economics, and that e 2.71828 is Euler's number) (20 points)
