production at wl= w2 = 1 is equal to 4, what is y equal to? 5.8. A firm has a cost function Let p be the price of output, and let the factor prices be fixed. If p = 2 how much will the firm produce? If p = 1 how much will the firm produce? What is the profit function of this firm? (Hint: be careful!) 5.9. A typical Silicon Valley firm produces output of chips y using a cost function c(y), which exhibits increasing marginal costs. Of the chips it produces, a fraction 1 - a are defective and cannot be sold. Working chips can be sold at a price p and the chip market is highly competitive. (a) Calculate the derivative of profits with respect to a and its sign.