Suppose a Technology Is Described by the Production Function

question 16

Essay

Suppose a technology is described by the production function
a.For a price taking producer who faces output price p and wage w, derive the first order condition and interpret it.
b.Without knowing more about the function f, is the condition you derived in (a) either necessary or sufficient for deriving the profit maximizing production plan? Explain.
c.Suppose .Derive the first order condition you illustrated in (a) and solve for .
d.For what values of is this first order condition necessary and sufficient for deriving a profit maximizing production plan? Explain.

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Definitions:

Correlational Method

A statistical technique used to determine the degree to which two variables are related without inferring a cause-and-effect relationship.

Confounding Variable

An extraneous variable in an experimental design that correlates with both the dependent and independent variables, potentially leading to a false assumption of causality.

Experimental Approach

A research method involving the manipulation of variables to observe and measure the effects on subjects in a controlled setting.

Manipulation of Variable

The process in experimental research of changing one variable to determine if changes in one variable cause changes in another variable.