1) Assume that a profit maximizing fimproduces output according to the following production function: q = K0.5L0.5, Suppose price = $20, v = $8 and w= $4. Show your work for parts a-c and check the second order conditions for each maximization. a) Suppose K=16. Find the short run total cost function (SC), the short run marginal cost function (SMC). How much is the fim going to produce? b) Maximize profit to get the firm's supply. Will the firm shut down? (Note: Maximize Il= pq - SC(q). c) Compute this firm's profit maximizing demand function for L. (Note: Maximize II= pK0.5L0.5 – vK – wL).
1) Assume that a profit maximizing fimproduces output according to the following production function: q = K0.5L0.5, Suppose price = $20, v = $8 and w= $4. Show your work for parts a-c and check the second order conditions for each maximization. a) Suppose K=16. Find the short run total cost function (SC), the short run marginal cost function (SMC). How much is the fim going to produce? b) Maximize profit to get the firm's supply. Will the firm shut down? (Note: Maximize Il= pq - SC(q). c) Compute this firm's profit maximizing demand function for L. (Note: Maximize II= pK0.5L0.5 – vK – wL).
Chapter2: Mathematics For Microeconomics
Section: Chapter Questions
Problem 2.2P
Related questions
Question
100%
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning