Problem 2
If a firm had everywhere increasing returns to scale, what would happen to its profits if prices remained fixed and if it doubled its scale of operation?
Problem 3
If a firm had decreasing returns to scale at all levels of output and it divided up into two equal-size smaller firms, what would happen to its overall profits?
Problem 4
A gardener exclaims: "For only \(\$ 1\) in seeds I've grown over \(\$ 20\) in produce!" Besides the fact that most of the produce is in the form of zucchini, what other observations would a cynical economist make about this situation?
Problem 5
Is maximizing a firm's profits always identical to maximizing the firm's stock market value?
Problem 7
Suppose a firm is maximizing profits in the short run with variable factor \(x_{1}\) and fixed factor \(x_{2} .\) If the price of \(x_{2}\) goes down, what happens to the firm's use of \(x_{1} ?\) What happens to the firm's level of profits?
Problem 8
A profit-maximizing competitive firm that is making positive profits in long- run equilibrium (may/may not) have a technology with constant returns to scale.
