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Microeconomics

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Moderate

Steps to Maximization: After First Order Conditions

MICRO-2X1XNY

When solving a maximization problem by using derivatives, the first order conditions will tell us all potential solutions, but what additional steps should be taken and why? Select ALL that apply.

A

Check that the second derivative is negative, to avoid finding a local minimum rather than a local maximum.

B

Check that the second derivative is positive, to avoid finding a local minimum rather than a local maximum.

C

Check that the second derivative is zero, to avoid non-real solutions.

D

Make sure that all variables are positive, and check the extreme values of the decision variables to find out if there is a corner solution.