Question

Consider a firm with the production function
f(L,K)=L^{1/2}K^{2} Suppose the firm is in the
short run and has a level of capital K = 1. If the cost of labor is
w=2 and the cost of capital is r=2, derive the a) TVC, b) TFC, c)
TC, d) MC, e) ATC, f) AVC, ) AFC. Draw these curves in a relevant
set of well-labelled diagrams. Repeat the exercise if the firm was
in the short run with a capital level of K=4

Answer #2

answered by: anonymous

2. A firm combines labor (L) and capital (K) to produce output
(Q). The price of one unit
of labor is 50 and the price of one unit of capital is 20. This
firm is producing in the
short run (remember that in the short run there is one fixed
resource, in this case,
capital). Complete the following information for this firm
L K Q TVC TFC TC ATC AVC AFC MC
0 20 0 -
1 18
2 60...

Consider the following total cost function for Firm A:
TC(Q)=4Q3-12Q2+2Q+1,000,000. Calculate TVC, AVC, TFC, AFC, AC. Does
this cost function satisfy the law of diminishing returns? Hint:
MC(Q)= 12Q2-24Q+2 Consider the following Long-run average cost
function for Firm A: TC(Q)= 12Q+4 (Q represents the scale of
operation). Does this firm benefit from scaling down? Explain your
answer.

Show working
21) The relationship Q = f(K, L) is an example of a
A) cost function.
B) production function.
C) demand equation.
D) profit equation.
28) After some point successive equal increases in a variable
factor of production, when added to a fixed amount of inputs, will
result in smaller increases in output. This is known as
A) the long run.
B) the law of diminishing marginal product.
C) marginal physical product.
D) short run average cost.
33) Suppose...

A perfectly competitive firm has the following total cost and
marginal cost functions:
TC = 100 +
10q – q2 + (1/3)q3
MC =
q2 – 2q +10
a) For quantities
from 0 to 10 determine: TC, TFC, TVC, and MC.
b) For quantities
from 0 to 10 determine: ATC, AFC, and AVC.
c) Assume P (MR)
equals 45. For quantities from 0 to 10 determine: TR and
profit.
d) At what quantity is
profit maximized?...

Complete the table below, which represents the production costs
for a typical firm. TP is total product (which is also Q). Please
note that for the first row (where TP = 0), you cannot calculate
the AFC, the AVC, the ATC and the MC, since there are 0 units being
produced. However, you are expected to calculate the TC for the
first row (where TP =0) and you are also expected to fill in all
the other missing numbers in...

1. Is the basic difference
between the short run and the long run that the law of diminishing
returns applies in the long run, but not in the short run?
2. Draw a typical
production function and explain its shape. Below that diagram, draw
an average product schedule and marginal product schedule. Indicate
the relationship between the two diagrams.
##3 Explain why the
marginal product of labour initially increases as more workers are
hired and then eventually...

For this activity, you must apply formulas for total variable
cost, average variable cost, average total cost, and marginal cost,
and use these computations to determine maximum profit
A firm’s cost curves are given in the following table:
Q
TC
TFC
TVC
AVC
ATC
MC
0
100
100
1
155
100
2
195
100
3
215
100
4
245
100
5
300
100
6
360
100
7
435
100
8
515
100
9
605
100
a) Complete the table.
b)...

16) In the short-run cost analysis, when a firm’s marginal cost
(MC) is unavailable, the best alternative of MC is its
a)
average total cost (ATC)
b)
average fixed cost (AFC)
c)
total variable cost (TVC)
d)
average variable cost (AVC)
19) Which of the following is NOT a market characteristic for
monopoly?
a)
One firm is the only supplier of a product.
b)
Entry into the market is blocked.
c)
The firm can influence market price though output
decision-making....

Suppose that a firm has production function F(L, K) = L1/4 K3/4
for producing widgets, the wage rate for labor is w = $32, and the
rental rate of capital is r = $6. Suppose the firm has an order to
produce 40 units of output.
a) Carefully write out the firm’s cost minimization problem,
using information specific to this problem.
b) Express two equations—specific to this problem—that the
optimal solution satisfies.
c) Solve these two equations for L* and...

Consider the following table of numbers, which represents demand
and cost conditions for a perfectly competitive firm. The market
price is 600$
(a) Fill in the missing values.
(b) What level of output should the firm produce? Explain.
(c) What do you expect to happen in this industry in the long
run? Explain.
Q
TFC
AFC
TVC
AVC
TC
ATC
MC
TR
MR
Profit
0
xxxx
0
xxxx
570
xxxx
xxxx
xxxx
1
570
240
2
430
3
670
4...

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