Answered: a. A firm's long-run total cost can be…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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a. A firm's long-run total cost can be written as LTC = 3000Q - 50Q²+ (1/3)Q³ and its long-run marginal cost by LMC = 3000 - 100Q + Q². Find the range over which the firm will experience economies of scale. Explain your answer.

b. A firm has a production function of Q = K * L + L, where the marginal product of labor is MP_L = K + 1 and the marginal product of capital is MP_K = L. The wage rate (W) is $100 per worker and the rental price (R) is $100 per unit of capital. In the short-run, capital (K) is fixed at 4. Find the minimum total cost of production in the short- and long-run if the firm produces 100 units of output.

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