1 2. Short-run versus long-run costs and expenditur Aa Aa The following isoquants depict the technologically efficient bundles of labor and capital for producing 100 and 150 units of output (labeled IQ [Q=100], and IQ [Q= 150], respectively). Suppose the firm is initially using the cost-minimizing bundle of labor and capital for producing 100 units of output, represented by point A. CAPITAL 50 45 40 35 30 25 20 15 10 JQ (0=1501 5 0 (0-100) 0 10 20 30 40 50 60 70 80 90 100 LABOR Imagine that the firm wants to compare the short-run expenditures and long-run costs associated with producing 100 units with the costs associated with other levels of production. Given that the firm is currently committed to 10 units of capital, complete the following table by entering the total amount the firm would have to spend on capital and abor at each level of production in both the short run and the long run if the wage rate (w) is $10 and rental rate of capital (r) is $20. Short-Run Expenditures ($) Quantity Produced Long-Run Costs ($) (Capital is (Capital is 0 100 150

1 2. Short-run versus long-run costs and expenditur Aa Aa The following isoquants depict the technologically efficient bundles of labor and capital for producing 100 and 150 units of output (labeled IQ [Q=100], and IQ [Q= 150], respectively). Suppose the firm is initially using the cost-minimizing bundle of labor and capital for producing 100 units of output, represented by point A. CAPITAL 50 45 40 35 30 25 20 15 10 JQ (0=1501 5 0 (0-100) 0 10 20 30 40 50 60 70 80 90 100 LABOR Imagine that the firm wants to compare the short-run expenditures and long-run costs associated with producing 100 units with the costs associated with other levels of production. Given that the firm is currently committed to 10 units of capital, complete the following table by entering the total amount the firm would have to spend on capital and abor at each level of production in both the short run and the long run if the wage rate (w) is $10 and rental rate of capital (r) is $20. Short-Run Expenditures ($) Quantity Produced Long-Run Costs ($) (Capital is (Capital is 0 100 150

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter7: Production And Cost In The Firm

Section: Chapter Questions

Problem 3.9P

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