1 c) The product function of a company is given by v? , where v is the number of units of the input factor. The company buys the input factor at a fixed price per unit given at 5 q=. Assume further that the company has fixed costs which in their entirety are sunk costs, and which is given by F = 100 . Show that the company's cost function is CO 20= y +100 .

1 c) The product function of a company is given by v? , where v is the number of units of the input factor. The company buys the input factor at a fixed price per unit given at 5 q=. Assume further that the company has fixed costs which in their entirety are sunk costs, and which is given by F = 100 . Show that the company's cost function is CO 20= y +100 .

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

c) The product function of a company is given by
1
v2 , where v is the number of units of
fv) =
the input factor. The company buys the input factor at a fixed price per unit given at 5
q =.
Assume further that the company has fixed costs which in their entirety are sunk costs, and which
is given by F= 100 . Show that the company's cost function is
CO 20=
y? +100 .
d) Take as a starting point the information given in task (c), and assume that the company can sell
finished goods in the market at a fixed price given by = 800
Formulate the company's profit function, and calculate which production volume
maximizes corporate profits.

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