Homework 2 ECON511: Microeconomic Analysis

Due Date: October 24, 2014 (5:00 PM)

1) Show for a single-output technology, Y is convex if and only if the production

function f(z) is concave.
2) Quasiconcave functions are defined as the functions having convex upper contour
sets. Another definition of Quasiconcave functions is as follows: If is a
function defined on the interval such that
then the function is quasiconcave. Prove that both these definitions are equivalent.
(Hint: Show that if a function is quasiconcave by definition 1 then it would
quasiconcave by definition 2 and if it quasiconcave by definition 2 then it is
quasiconcave by equation 1).

3) Suppose that f(.) is the production function associated with a single output
technology and let Y be the production set of this technology. Show that Y
satisfies constant returns to scale if and only if f(.) is homogeneous of degree one.
4) Prove that if the production possibilities set exhibits a non-decreasing returns to
scale then either or
5) Derive the short run profit function for constant returns Cobb Douglas technology
for n=2. (Suppose x2 is fixed.) Find the short run supply associated with it. Prove
that supply function is upward sloping.
6) A Leontief Production function has the form : y=min{ax1,Bx2} for a>0 and B>0.
Carefully sketch isoquant map for this technology and verify that elasticity of
substitution is zero for this form. In addition calculate the profit function and
input demands for Leontief Production function.
7) Let the production function be the CES form: y=(x1p+x2p)B/p. Show that when B<1
this function exhibit decreasing returns to scale. Suppose that B<1 and p is not
zero and p<1. Find the input demand and output supply function associated with
the production function. Also obtain the profit function from it. Explain why when
there is increasing returns (B>1) maximum profits are undefined.