3. Answer all parts (a)-(e) of this question. Consider the following production function: Q = 3KL, with marginal produc MPL = K L3 and MPK Define the unit prices of L and K as w and r, r L3 KS Finally, assume that the firm takes the price of its product, p, as given and maximiz Imagine capital is fixed at Ko = 1 in the short run. What is the sh function of the firm? Explain briefly. (a) (b) What is the long-run cost function of the firm? What is the long-run supply function of the firm?
3. Answer all parts (a)-(e) of this question. Consider the following production function: Q = 3KL, with marginal produc MPL = K L3 and MPK Define the unit prices of L and K as w and r, r L3 KS Finally, assume that the firm takes the price of its product, p, as given and maximiz Imagine capital is fixed at Ko = 1 in the short run. What is the sh function of the firm? Explain briefly. (a) (b) What is the long-run cost function of the firm? What is the long-run supply function of the firm?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
part C D E

Transcribed Image Text:3. Answer all parts (a)-(e) of this question.
Consider the following production function: Q = 3K&L, with marginal products given by
L3
MPL = K
and MPK
Define the unit prices of L and K as w and r, respectively.
Finally, assume that the firm takes the price of its product, p, as given and maximizes profits.
L3
K3
(a)
Imagine capital is fixed at Ko = 1 in the short run. What is the short-run cost
function of the firm? Explain briefly.
(b)
(c)
(d)
(e)
when rw = 1?
What is the long-run cost function of the firm?
What is the long-run supply function of the firm?
What is the profit function of the firm?
Now suppose that set-up costs are £1. What is the shut down rule of the firm
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps

Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you


Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON

Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON


Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON

Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON

Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning

Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education