Theory of Production-Forms of Production Functions (IEcoS (Economic Services) Economics Paper-1): Questions 1 - 4 of 5

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Question number: 1

» Theory of Production » Forms of Production Functions

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Appeared in Year: 2011

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Consider a Cobb Douglas production function where K and L are respectively the capital and labour to produce output y. show that if all the factors are paid according to their marginal products, the total product will be enhausted if

Question number: 2

» Theory of Production » Forms of Production Functions

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Consider the following duopoly. Demand is given by where the firm’s cost function are:

What is each firm’s equilibrium output and profit if they behave non-co-operatively? (Section C)

Explanation

  • In the Cournot model, firm 1 takes firm output as given and maximizes profits. The profit function them becomes:

  • To find Cournot equilibrium, we substitute firm

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Question number: 3

» Theory of Production » Forms of Production Functions

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Appeared in Year: 2013

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Consider the following duopoly. Demand is given by where the firm’s cost function are:

Suppose both firms have entered the industry. What is joint profit maximising level of output? How much will each firm produce? How would your answer change if the firms have not yet entered the industry? (Section C)

Explanation

  • Setting marginal revenue to marginal cost (the MC of firm 1 since it is lower than that of firm 2) we get:

  • How the firms will divide the total output among themselves? Since the firms have different co

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Question number: 4

» Theory of Production » Forms of Production Functions

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Appeared in Year: 2015

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Define Linear homogenous production function and give an example. Show that in the case of the linear homogenous production function the expansion path must be a straight line passing through the origin.

Explanation

The Linear Homogeneous Production Function implies that with the proportionate change in all the factors of production, the output also increases in the same proportion.

  • Such as, if the input factors are doubled the output also gets doubled. This is also known as constant returns to a scale.

  • The production function is said to be homogeneous when the

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