suppose that input prices are (w, r) >> 0, where w is the wage rate (price of a unit of labor) and r is the interest rate (price of a unit of capital). Suppose the firm must produce y > 0 units of output. (a) Formulate the firm's cost minimization problem. (b) Illustrate the solution to the cost minimization problem in an ap- propriate diagram. (c) Solve the cost minimization problem to find the firm's conditional input demand functions for labor and capital, and its cost function. (d) Assume that w = r = 4. In appropriate diagrams, illustrate the firm's (i) conditional input demand for labor, (ii) its conditional input demand for capital, (iii) its total, average and marginal costs.

suppose that input prices are (w, r) >> 0, where w is the wage rate (price of a unit of labor) and r is the interest rate (price of a unit of capital). Suppose the firm must produce y > 0 units of output. (a) Formulate the firm's cost minimization problem. (b) Illustrate the solution to the cost minimization problem in an ap- propriate diagram. (c) Solve the cost minimization problem to find the firm's conditional input demand functions for labor and capital, and its cost function. (d) Assume that w = r = 4. In appropriate diagrams, illustrate the firm's (i) conditional input demand for labor, (ii) its conditional input demand for capital, (iii) its total, average and marginal costs.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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