Your Uncle plans to open a business that will operate five stores in the Mississauga area. Four of these firms will operate with production functions q = K1/4L1/4 while the fifth store, the Heartland Superstore will have production function q = 2K^(1/4)L^(1/4). a. Derive the long-run marginal cost curve for the business. (all five stores combined). b. He will be paying competitively determined input prices of PL = $16 and PK = $1 and can sell output for P = $32. (Do not use this information in Part a.) How many persons should he hire for each store? How many units of capital should be installed in each store? Calculate his profits.

Your Uncle plans to open a business that will operate five stores in the Mississauga area. Four of these firms will operate with production functions q = K1/4L1/4 while the fifth store, the Heartland Superstore will have production function q = 2K^(1/4)L^(1/4). a. Derive the long-run marginal cost curve for the business. (all five stores combined). b. He will be paying competitively determined input prices of PL = $16 and PK = $1 and can sell output for P = $32. (Do not use this information in Part a.) How many persons should he hire for each store? How many units of capital should be installed in each store? Calculate his profits.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.5P

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