1. The Chapter stresses the idea that the firm straddles input and output markets. Explain this notion. What role does the firm’s cost function play as it straddles input and output markets?
2. Expressions (2.1) and (2.7) provide equivalent descriptions of the profit maximizing firm’s behavior. Why is a cost function present in expression (2.7) but not in expression (2.1)? What purpose is served by the firm’s cost function?
3. We insisted in notation ally describing the firm’s cost curve with C(q; P) as opposed to simply C(q). Explain.