(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.<
Chapter9: Production Functions
Section: Chapter Questions
Problem 9.7P
Related questions
Question
![(a) Suppose we have the following production function: Q = min [10 K, L]. Confirm the technology is
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 price
is P = $100. What is optimal output Q and optimal input L? Should the firm simply shut-down (Q=0)?
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. <](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Faf4d5614-e5fa-4399-aabc-c345eeef0588%2F3ada47e0-75b9-4852-9825-62ef7fde508b%2Fc5b3d9bi_processed.png&w=3840&q=75)
Transcribed Image Text:(a) Suppose we have the following production function: Q = min [10 K, L]. Confirm the technology is
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 price
is P = $100. What is optimal output Q and optimal input L? Should the firm simply shut-down (Q=0)?
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. <
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