Lecture 2.3

Question 1

Maximizing profit via optimal use of inputs

Answer 1

MVP=MFC

Question 2

Principle of Maximizing profits or allocating resources given constraints

Answer 2

equimarginal principle

Question 3

shows various combination of inputsthat entail same cost

Answer 3

Budget line

Question 4

budget line is mathematically expressed as

Answer 4

C0= v1x1+v2x2

Question 5

slope of isoquant= slope of isocost line

Answer 5

mpp1/mpp2 = v1/v2

Question 6

point of tangency duality

Answer 6

combination of inputs that will produce greatest quantity of output, given expenditure represented by C0

Least cost combination of inputs that can be used to produce y0

Question 7

path traced by producers, connects all points on isoquant map where slope of isoquant equal isocost

Answer 7

expansion path

Question 8

expansion path equation

Answer 8

x2= b2v1/b1v2 x1

Question 9

Ensures that if the farm is not operating on the point of profit maximization, costs are minimized, maximum output is produced

Answer 9

equimarginal return principle

Question 10

true or false equimarginal principle requires farmers operate using combination of inputs such that shadow prices of inputs are equal

Answer 10

true

Question 11

2 components of constrained optimization problem

Answer 11

objective function and constraint function

Question 12

what should the farmer do whenthe multipliers are not equal

Answer 12

should reallocate

Question 13

what does it mean when one multiplier is greater than the other

Answer 13

that input is more productive

Question 14

shadow price

Answer 14

MVP/V

Question 15

output maximization subject to budget constraint soc

Answer 15

H>0 positive

Question 16

unconstrained

Answer 16

global maximum

Question 17

constrained

Answer 17

local max

Question 18

multiplier interpretation output maximization wrt budget con

Answer 18

the quantity that arise from the last peso spent on input

Question 19

cost minimization subject to a target level output

Answer 19

minimize v1x1+v2x2 subject to fx1x2=y0

Question 20

max output subject to budget constraint

Answer 20

L=fx1x2- theta (v1x1+v2x2-C0)

Question 21

cost minimization subject to target output level soc

Answer 21

negative determinant

Question 22

cost min. subject to target output level multiplier

Answer 22

cost of producing the last unit of output

Question 23

revenue max wrt budget constraints

Answer 23

R=pfx1x2
subject to v1x1+v2x2=c0

Question 24

revenue max wrt budget constraint multiplier

Answer 24

the additional revenue form the last peso spent on inputs

Question 25

revenue max wrt to budget constraints SOC

Answer 25

should be positive

Question 26

cost minimization wrt target revenue level

Answer 26

minimize C=v1x1+v2x2 subject to pf x1x2=R0

Question 27

cost minimization wrt target revenue level multiplier

Answer 27

cost incurred using an input to generate the last peso worth of revenue

Question 28

cost minimization wrt target revenue level soc

Answer 28

should be negative

Question 29

line connecting all points of profit maximization for one input assumingthe other input to be fixed

Answer 29

pseudo scale line

Question 30

point of global profit max

Answer 30

k=1

Question 31

global output maximization

Answer 31

k=0

Question 32

below point of goobal profit maximization

Answer 32

k>1

Question 33

between point of profit max and point of output max, never wish to operate

Answer 33

less than one but greater than 0

Question 34

beyond global output max, MPP negative

Answer 34

k<0

Question 35

pseudo scale line coincide ridgeline

Answer 35

price =0

Question 36

output maximization wrt budget constraint

Answer 36

Max y subject to C0