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

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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The firm's production function is given as follows: qx = f(Lx, Kx). qx represents the output produced by the firm, Lx represents the labor input and Kx the capital input. In the long-run, the firm uses both inputs to produce output. An increase in the supply of capital (K) reduces the cost of capital from $6 per unit to $2 per unit. As a result, the firm's demand for the labor input (L) decreases from 200 to 120 units. Based on this information, the cross-price elasticity of labor demand is: O a. 0.50 O b.-0.25 Oc. 0.25 O d.0.75
The graph below shows the marginal cost (MC), average variable cost (AVC), and average total cost (ATC) curves for a firm in a competitive market. These curves imply a short-run supply curve that has two distinct parts. One part, not shown, lies along the vertical axis (quantity-0); this represents a condition of production shutdown. Where is the other part? Use the straight-line tool to drawit. To refer to the graphing tutorial for this question type, please click here Price and cost 18 15 14 13 12 10 19/21 SUBMIT ANSWER 13 OF 21 QUESTIONS C OMPLETED 28 MacBook Pro 금□ F7 F8 F9 F1o F2 F3 F5
Problem 1 Hobbies Co is a firm that produces model trains in a perfectly competitive market. The production of each model train requires millilitres of paint (P), and grams of wood (W). Their production function is given by f(P,W)= min{6√P, 3W – 12}. (a) Draw the isoquant corresponding to q = 48 trains in a clearly labelled diagram where P is the horizontal axis and W is the vertical axis. Label two distinct input bundles (P, W) in the diagram which give q = 48. (b) Compute the marginal products of each input. (c) Does this production function exhibit constant returns to scale? Using the marginal products you have computed in the previous part, explain your answer in no more than 25 words. (d) Suppose that HobbiesCo wants to produce q trains when the price of paint is $72/mL and the price of wood is $18/g. Show that the minimum cost of such an undertaking is c(q) = 2q² +6q+72. (e) Suppose that the market price is p, and Hobbies Co will produce q units of trains. Using the cost function…
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