2) Craft Corp.'s production function is given by q = 5min(K, 2L), where q is the quantity produced and K and L are the amounts of capital and labor input. Input prices are r = 2 and w = 6. a) Find Craft Corp's long-run cost function. b) Draw Craft Corp's Long isoquants and isocost and show the equilibrium when q = 2000. What is the total cost to produce q = 2000? What is the labor cost to produce q = 2000? What is the capital cost to produce q = 2000? c) Suppose in the short run K is fixed at 20. Find Craft Corp's short-run cost function. Represent both, the short-run and the long-run cost function in a diagram.

2) Craft Corp.'s production function is given by q = 5min(K, 2L), where q is the quantity produced and K and L are the amounts of capital and labor input. Input prices are r = 2 and w = 6. a) Find Craft Corp's long-run cost function. b) Draw Craft Corp's Long isoquants and isocost and show the equilibrium when q = 2000. What is the total cost to produce q = 2000? What is the labor cost to produce q = 2000? What is the capital cost to produce q = 2000? c) Suppose in the short run K is fixed at 20. Find Craft Corp's short-run cost function. Represent both, the short-run and the long-run cost function in a diagram.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Short-Run Costs and Long-Run Costs

Cost of short-run and the long-run is an economic term that describes the cost involved in the production of goods in a firm in the short as well as long period.

Question

2) Craft Corp.'s production function is given by $ q = 5 \min(K, 2L) $, where $ q $ is the quantity produced and $ K $ and $ L $ are the amounts of capital and labor input. Input prices are $ r = 2 $ and $ w = 6 $.

a) Find Craft Corp’s long-run cost function.

b) Draw Craft Corp’s long isoquants and isocost and show the equilibrium when $ q = 2000 $. What is the total cost to produce $ q = 2000 $? What is the labor cost to produce $ q = 2000 $? What is the capital cost to produce $ q = 2000 $?

c) Suppose in the short run, $ K $ is fixed at 20. Find Craft Corp’s short-run cost function. Represent both, the short-run and the long-run cost function in a diagram.

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