4. Suppose that the price per unit of input K is 1 euro, the price per...

4. Suppose that the price per unit of input K is 1 euro, the price per unit of input C is 12 euros and the price per unit of input L is 3 euros a) What is the minimum cost of producing 40 units of output y for the firm if the firm’s production function is Y =min {K;4C}+ L/2 ?

The Government is planning a policy, which envisages simultaneously the following two policies: 1)

introduction of a tax of 1 euro per unit of input L, and 2) introduction of a subsidy of 2 euros per unit of

input C. Find and explain briefly, how would the planned policy affect this firm. Would it affect the

minimum cost of production of 40 units of output? Would it affect the technology used? Provide

calculations for proof.

Solutions

Expert Solution

Colby Messinger answered 1 month ago

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