I. True or False and Explain (50%) Evaluate each of the following statements as true or false. Explain your answer briefly but thoroughly. 1. The compensating variation and the equivalent variation are mostly not the same.

II. The production function of Firm A is $$q^A = \min\{2L, 2K\}.$$ Firm A is a price taker at the factor market. The unit price of L is 1, and the unit price of K is r > 0. The inverse demand at the product market is p = 1 - Q, where p is the market price and Q the market quantity. 1. (3%) What is the cost function of Firm $A$?

I. True or False and Explain (50%)

Evaluate each of the following statements as true or false. Explain your answer briefly but thoroughly.

1. The compensating variation and the equivalent variation are mostly not the same.

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