2. Consider a firm that has the following production function, q = 3L5K3, where the rental rate (r) and wages (w)denote the prices of capital (K) and labor (L). Suppose K = 27 (fixed) and L is variable.%3Da. Write down the expression for the short-run production function. In no more than two sentences,describe the fundamental difference between the short-run and long-run in production.b. Compute the marginal product of labor (MPL) and the average product of labor (APL). Is the MPincreasing or decreasing as labor increases? Is MP, >, <, or = AP,?c. FC, VC(q), AC(q), MC(q) and C(q) denote the fixed, variable, marginal and the total costs ofproducing q units. Find expressions for each (keep in mind that all, but FC, must be functions of outputproduced (q).d. Find the level of output (q), which will depend on w and r, where average cost is minimized?e. Imagine that congress imposes a $8 specific tax per unit this company's output, what are the company'snew cost functions (FC, VC(q), AC(q), MC(q) and C(q))?

In economics, a production function gives the technological relation between quantities of physical…

2. Consider a firm that has the following production function, q = 3L3KŠ, where the rental rate (r) and wages (w) denote the prices of capital (K) and labor (L). Suppose K = 27 (fixed) and L is variable. a. Write down the expression for the short-run production function. In no more than two sentences, describe the fundamental difference between the short-run and long-run in production. b. Compute the marginal product of labor (MPL) and the average product of labor (APL). Is the MPL increasing or decreasing as labor increases? Is MP, >, <, or = AP? c. FC, VC(q), AC(q), MC(q) and C(q) denote the fixed, variable, marginal and the total costs of producing q units. Find expressions for each (keep in mind that all, but FC, must be functions of output produced (q). d. Find the level of output (q), which will depend on w and r, where average cost is minimized? e. Imagine that congress imposes a $8 specific tax per unit this company's output, what are the company's new cost functions (FC, VC(q), AC(q), MC(q) and C(q))?

2. Consider a firm that has the following production function, q = 3L3KŠ, where the rental rate (r) and wages (w) denote the prices of capital (K) and labor (L). Suppose K = 27 (fixed) and L is variable. a. Write down the expression for the short-run production function. In no more than two sentences, describe the fundamental difference between the short-run and long-run in production. b. Compute the marginal product of labor (MPL) and the average product of labor (APL). Is the MPL increasing or decreasing as labor increases? Is MP, >, <, or = AP? c. FC, VC(q), AC(q), MC(q) and C(q) denote the fixed, variable, marginal and the total costs of producing q units. Find expressions for each (keep in mind that all, but FC, must be functions of output produced (q). d. Find the level of output (q), which will depend on w and r, where average cost is minimized? e. Imagine that congress imposes a $8 specific tax per unit this company's output, what are the company's new cost functions (FC, VC(q), AC(q), MC(q) and C(q))?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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