|Question||(a) Write an equation that gives the firmâ??s profits, Ï?, as a function of the amount of input x it uses, the amount of output y it produces, the per-unit cost of the input w, and the price of output p. Ï? = pyâ??wx.
(b) In the diagram below, draw an is o profit line for each of the three periods, showing combinations of input and output that would yield the same profits that period as the combination actually chosen. What are the equations for these three lines? y = x, y = 1 + .5x, y = 2 + .25x.
Using the theory of revealed profitability, shade in the region on the graph that represents input-output combinations that could be feasible as far as one can tell from the evidence that is available.
How would you describe this region in words?