Problem 3* A competitive firm has the following production function: f(L,K) = min {L, K}. Suppose the wage rate is 2, and the rental rate of capital is 4. (a) Derive the long-run cost function for the firm. (b) Calculate the long-run marginal cost curve and the average cost curve for the firm. (c) Write down the long-run supply function and graph the long-run supply curve for the firm.

Problem 3* A competitive firm has the following production function: f(L,K) = min {L, K}. Suppose the wage rate is 2, and the rental rate of capital is 4. (a) Derive the long-run cost function for the firm. (b) Calculate the long-run marginal cost curve and the average cost curve for the firm. (c) Write down the long-run supply function and graph the long-run supply curve for the firm.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

Section: Chapter Questions

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Concept explainers

Short-Run Costs and Long-Run Costs

Cost of short-run and the long-run is an economic term that describes the cost involved in the production of goods in a firm in the short as well as long period.

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Problem 3*
A competitive firm has the following production function:
f(L,K) = min {L, K}.
Suppose the wage rate is 2, and the rental rate of capital is 4.
(a) Derive the long-run cost function for the firm.
(b) Calculate the long-run marginal cost curve and the average cost curve for the firm.
(c) Write down the long-run supply function and graph the long-run supply curve for the firm.
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