A firm’s production function be given by y = x1 + x2 with w1 and w2...

A firm’s production function be given by y = x1 + x2 with w1 and w2 being the price of inputs 1 and 2 respectively.

(a) Derive the conditional factor demands.

(b) Suppose w1 = 2 and w2 = 1. Find the long-run cost function for this firm. Derive and graph the firm’s long-run supply curve.

(c) Suppose the price of x2, w2, increases to $2 per unit. What is the long-run cost curve? Derive and graph the new supply curve.

Expert Solution

Rahul Sunny answered 9 months ago

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