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EXERCISE 3 A ?rm has cost function  2 f _ y + 1 i y > 0C(31) — { 0 ify = 0 Let p be the price of output. 1 (1) If p = 2, how much will the ?rm produce? If p = 1, how much will the ?rmproduce? (2) What is the (optimal) pro?t function of the ?rm? EXERCISE 4 A producer produces good :1; using inputs 3:1 and .132 according to the production functiony = :1:ng where a + [3’ < 1. The factor prices are 101 and 102 (for input 1 and 2). Theproducer can sell as much as he wants at unit price p. (1) Derive the cost function C(x, y). (2) What is the producer’s optimal pro?t as a function of (wl, 1112, p)?

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