Problem 1
A presidential candidate hires an advertising agency.
She pays CZK 100,000 for each percentage point of voters.
The agency uses billboards B to create votes: V = 100B/(B + 1)
One billboard costs CZK 100,000.
What is the number of billboards a profit-maximizing agency uses?
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Problem 2
Firm XYZ has a production function f (x, y, z) = (x + y)
1
2 z
1
2 .
The prices of inputs are (wx , wy , wz) = (100, 200, 300).
What is the percentage change in total costs if wy doubles?
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Problem 3
Firm ABCD uses four inputs with prices (wa, wb, wc, wd ) = (5, 1, 2, 3)
a) What is the minimal cost of producing one unit of output if the firm’s
production function is f (a, b, c, d) = min{a + b, c + d}?
b) What is the minimal cost of producing one unit of output if the firm’s
production function is f (a, b, c, d) = min{a, b} + min{c, d}?
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