(a) Suppose we have the following production function: Q = min [10 K, L]. Confirm the technology constant returns to scale (CRS). Show your work and explain what it means.< (b) Show the isoquants in a figure. What are the input requirements for Q = 100? Explain how this tells you the input requirements for Q = 1.< (c) Assume you are in the short-run with K = 10. Let r = $1000 and w = $10. Suppose the market pr is P = $100. What is optimal output Q and optimal input L? Should the firm simply shut-down (Q= Why/why not.< (d) What do we mean by a shut-down price? (e) Find the firm's shut-down price. That is, what is the minimum price that ensures the firm has positive output given r = $1000 and w = $10? Explain and show your work.<

(a) Suppose we have the following production function: Q = min [10 K, L]. Confirm the technology constant returns to scale (CRS). Show your work and explain what it means.< (b) Show the isoquants in a figure. What are the input requirements for Q = 100? Explain how this tells you the input requirements for Q = 1.< (c) Assume you are in the short-run with K = 10. Let r = $1000 and w = $10. Suppose the market pr is P = $100. What is optimal output Q and optimal input L? Should the firm simply shut-down (Q= Why/why not.< (d) What do we mean by a shut-down price? (e) Find the firm's shut-down price. That is, what is the minimum price that ensures the firm has positive output given r = $1000 and w = $10? Explain and show your work.<

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

How would you determine that a two-input Cobb-Douglas production function has decreasing returns to scale (DRS), increasing returns to scale (IRS) or constant returns to scale (CRS) depending on whether α1 + α2 is larger than, smaller than, or equal to one?
QUESTION 1 For the production function Qs = K0.6L0.7 find the returns to scale, recall that a doubling of inputs that doulbes output is a CONSTANT returns to scale = 1.0 Please enter your response as a positive number with 1 decimal and 5/4 rounding (e.g. 1.15 = 1.2, 1.14 = 1.1).
Suppose a firm could produce data storage services using two inputs: high capacity hard drive (200 TB) or low capacity hard drive (100 TB). What is the production function and what is a typical set of isoquant?
Identify the returns to scale in the functions below. Production Function a. q = 3L + 2K Returns to Scale constant increasing decreasing
How would you determine that a two-input Cobb-Douglas production function has decreasing returns to scale (DRS), increasing returns to scale (IRS) or constant returns to scale (CRS) depending on whether β is larger than, smaller than, or equal to one?
For the production function Qs = K0.4L0.1 find the returns to scale, recall that a doubling of inputs that doulbes output is a CONSTANT returns to scale = 1.0 Please enter your response as a positive number with 1 decimal and 5/4 rounding (e.g. 1.15 = 1.2, 1.14 = 1.1).