2. A firm uses capital (denoted by K) and labor (denoted by L) to produce hockey sticks. The firm's production function is given by q = 2\KL. In the short run, the firm's amount of capital equipment is fixed at K = 100. The rental rate for capital is $1 per unit and the wage rate is equal to $4. a) Calculate the firm's short-run total cost function. Also, calculate the short-run average cost function. b) Calculate the firm's short-run marginal cost function. c) Graph the firm's short-run marginal and average (total, fixed, and variable) cost curves. d) Where does the short-run marginal cost intersect the short-run total average cost? Explain why this is so.

2. A firm uses capital (denoted by K) and labor (denoted by L) to produce hockey sticks. The firm's production function is given by q = 2\KL. In the short run, the firm's amount of capital equipment is fixed at K = 100. The rental rate for capital is $1 per unit and the wage rate is equal to $4. a) Calculate the firm's short-run total cost function. Also, calculate the short-run average cost function. b) Calculate the firm's short-run marginal cost function. c) Graph the firm's short-run marginal and average (total, fixed, and variable) cost curves. d) Where does the short-run marginal cost intersect the short-run total average cost? Explain why this is so.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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