Suppose we have two ﬁrms with the following production technologies f (x1,x2) = min{x1,2x2} f (x1,x2)...

Suppose we have two ﬁrms with the following production technologies

f (x1,x2) = min{x1,2x2}

f (x1,x2) = x1 + 2x2
Suppose the ﬁrms face the same prices on inputs. Denote the input prices by w1,w2. Further suppose the ﬁrms can sell their output for the same price p.
(a)Find the demand function for the inputs for both ﬁrms

(b)Suppose w1 = 1,w2 = 2, and p = 10, what are the proﬁts of the ﬁrms
(c)Suppose the price of input 1 goes down to .5, analyze the effect of the decrease in price on the demands and the proﬁts of the ﬁrms.

Expert Solution

Rahul Sunny answered 5 months ago

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