Question

(b) Find the necessary first order conditions. (2) (c) What are the second order sufficient conditions for profit maximization? Do they hold (2) (d) Using the total differential and Cramer’s Rule, find how the optimal level of q1 changes when price of good 2, p2, changes? (2) (e) Write the optimal choices of q1 and q2 as functions of prices. (2) (f) Using your answer in part 4e, find dq1/dp2 and verify this the same answer as you obtain in part 4d. (2) (g) Find the Value function for the firm’s optimal profits in this problem. (2) (h) Use the Envelop theorem to find the impact of a change in p1 on the firm’s optimal profits (2)

          (b) Find the necessary first order conditions. (2)
(c) What are the second order sufficient conditions for profit maximization? Do they hold (2)
(d) Using the total differential and Cramer’s Rule, find how the optimal level of q1 changes when price of good 2, p2, changes? (2)
(e) Write the optimal choices of q1 and q2 as functions of prices. (2)
(f) Using your answer in part 4e, find dq1/dp2 and verify this the same answer as you obtain in part 4d. (2)
(g) Find the Value function for the firm’s optimal profits in this problem. (2)
(h) Use the Envelop theorem to find the impact of a change in p1 on the firm’s optimal profits (2)

(b) Find the necessary first order conditions. (2)
(c) What are the second order sufficient conditions for profit maximization? Do they hold (2)
(d) Using the total differential and Cramer’s Rule, find how the optimal level of q1 changes when price of good 2, p2, changes? (2)
(e) Write the optimal choices of q1 and q2 as functions of prices. (2)
(f) Using your answer in part 4e, find dq1/dp2 and verify this the same answer as you obtain in part 4d. (2)
(g) Find the Value function for the firm’s optimal profits in this problem. (2)
(h) Use the Envelop theorem to find the impact of a change in p1 on the firm’s optimal profits (2)

Added by Ann P.

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