Question
Microeconomics Question on Market structure
For a firm operating in a perfectly competitive market which of the following statements is CORRECT?
A
Profit function is convex and homogeneous of degree 1 in prices
B
Profit function is concave and homogeneous of degree 1 in prices
C
Profit function is convex but not homogeneous in prices
D
Profit function is neither concave nor convex in prices
Answer
Profit function is convex and homogeneous of degree 1 in prices
Explanation
Solution
The correct option is (A): Profit function is convex and homogeneous of degree 1 in prices