(a) Suppose we have the following production function: Q = K²/³12/3. Does the technology have constant returns to scale (CRS)? If not, what? Show your work and explain what it means.< (b) What is the firm's cost minimi on problem in the long-run? Explain and illustrate in a figure using isocost and isoquants how termine optimal inputs K and L. (c) Now, consider the short-run where K is fixed at 8 (so that K²/³ = 4). Let r = $20 and w = $10. Show then discuss how short-run average costs change as Qrises. You can use math or a table/figure to do this. (d) Suppose P = $15. Show that optimal Q = 64 in the short-run. You can use math or a spreadsheet. Show details. < (e) Now suppose P = $5. Should the firm shut-down and set Q=0? Explain. <

(a) Suppose we have the following production function: Q = K²/³12/3. Does the technology have constant returns to scale (CRS)? If not, what? Show your work and explain what it means.< (b) What is the firm's cost minimi on problem in the long-run? Explain and illustrate in a figure using isocost and isoquants how termine optimal inputs K and L. (c) Now, consider the short-run where K is fixed at 8 (so that K²/³ = 4). Let r = $20 and w = $10. Show then discuss how short-run average costs change as Qrises. You can use math or a table/figure to do this. (d) Suppose P = $15. Show that optimal Q = 64 in the short-run. You can use math or a spreadsheet. Show details. < (e) Now suppose P = $5. Should the firm shut-down and set Q=0? Explain. <

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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