Assignment 6

1. Find the stationary point(s) of the function f(x,z) = 8x – x 2 +14z – 7z2

2. A competitive firm has the following Short run TC function:

TC = Q3 – 8Q2 + 30Q + 5

a) For this firm, find the price range below which the firm will shut down in the SR
b) Identify the firm’s short run supply curve (can sketch it. Doesn’t have to be on scale)

3. Suppose that an individual’s labor compensation depends on the person’s Education E and Years
of Experience T in a given profession. The Compensation Function C is given by:

C = -2E2 + 78E -2T2 + 66T – 2ET

4. A monopolist’s produces an identical product in two plants, one in St. Louis and the other in KC.

The Total Cost of production in St Louis is C1 = Q1 + Q1 2

The Total Cost of production in KC is C2 = 6Q2 + 1.5 Q2 2

The market demand for the product is P = 56 – 2Q, where Q = Q1 + Q2 is the total output sold.

What levels of output should the firm produce in each plant to maximize its profits.

A profit-maximizing firm has the total-

cost function
C = 0.5x
3
and sells into a competitive market on
which the price is $1.00. What output
should it produce? What would your
answer be if the price were $2