A firm hires two inputs, input 1 and input 2, to make output. Unfortunately, for every unit of input 1 that the firm hir

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A Firm Hires Two Inputs Input 1 And Input 2 To Make Output Unfortunately For Every Unit Of Input 1 That The Firm Hir 1 (30.24 KiB) Viewed 36 times

A firm hires two inputs, input 1 and input 2, to make output. Unfortunately, for every unit of input 1 that the firm hires, 1 - a units turn out to be defective, where 1 > 1 - a > 0. That is, only a fraction a of purchased units of input 1 actually contributes to producing output y. Let ₁ and ₂ be the quantities that are not defective and can be employed towards production. If rounding is needed, please round your answers to 3 decimal places. Suppose the firm's production function is such that ₁ and 2 are perfect substitutes: each unit of output can be made with either one unit of ₁ or units of #2. Suppose ₁ = 1 and 2 = 6. It is optimal for the firm to hire only input 1 (and hire 0 units of input 2) if a> Suppose the firm's production function is such that ₁ and 2 are perfect complements: the firm needs 1 unit of ₁ and 10 units of 2 to make each unit of output. Find the total cost of producing 6 units of output when W₁ = W₂ = 1 and a = 0.7.