Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Question
Chapter 10, Problem 10.7P
a)
To determine
To find: Demand function for each input, k and l
b)
To determine
To know: Production function for q.
c)
To determine
To know: CES production function.
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Suppose the long-run production function for a competitive firm is f(x1,x2)= min {3x1,2x2}. The cost per unit of the first input is w1 and the cost of the second input is w2.
A: Find the cheapest input bundle, i.e. amount of labor and capital, that yields the given output level of y.
B: Write down the formula and draw the graph of the firm’s total cost function as a function of y, using the conditional input demand functions. What is the relationship between the returns to production scale and the behavior of the total costs?
C: Write down the formulas and draw the graphs of the average cost and marginal cost functions, as functions of y.
Suppose the production function for a competitive firm is y=f(x1,x2)= x1 1/4 x2 1/4 . The cost per unit of the first input is w1 and the cost of the second input is w2.
A: What are the returns to scale of this production function?
B: Find the cheapest input bundle, x1 and x2, that yields the given output level of y.
C: Write down the formula of the firm’s total costs as a function of y.
D: Are the average costs increasing, constant or decreasing in y? Are the marginal costs increasing, constant or decreasing in y?
Suppose the long-run production function for a competitive firm is f(x1,x2)= min {x1,2x2}. The cost per unit of the first input is w1 and the cost of the second input is w2.
.d. Write down the formula and draw the graph of the average cost function, as a function of y.
.e. Write down the formula and draw the graph of the marginal cost function, as a function of y.
Chapter 10 Solutions
Microeconomic Theory
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Similar questions
- A firm uses L and K to produce Q, and the firm's production function is Q=0.2L + 0.2K. The wage per labor hour is $12 and the price of each machine hour is $18. Given this information, and if fixed costs are zero, then the firms total cost of producing Q units is -----?arrow_forwardQ. 3 Consider a firm with a production function given by Q = F(K, L) = 2KL . 5-a) Compute the degree of homogeneity and determine the returns to scale of this production function . 5-b) Compute the long -run total cost function of this firm TC(Q)^ prime prime "if prices of the inputs are given by p k =$2 and p L =$1arrow_forwardSuppose that a firm has a short-run cost function C(q) = q2 +1. Part a Find the short-run supply function of this firm. Part b Given this production function, at what output is average cost (AC) minimized?arrow_forward
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