Question

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

3 100

4 3

Show your work.?

Answer #1

**Solution:-**

Consider a firm with the production function
f(L,K)=L1/2K2 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...

3. Cost Tables
(a) Fill in the following table, where TFC = Total Fixed Cost,
TVC = Total Variable Cost, TC = Total Cost, AFC = Average Fixed
Cost, AVC = Average Variable Cost, ATC = Average Total Cost, and MC
= Marginal Cost. Remember the following relationships:
TFC + TV C = TC
AF C = T F C/Q, AV C = T V C/Q, AT C = T C/Q
MC = ∆TC ∆Q
Output (Q)
TFC
TVC
TC...

Q2: Complete the following table. Show costs to 2 decimal places
if they are not whole numbers. Hint: Start with the second row.
Q (units)
TFC ($)
AFC ($/unit)
TVC ($)
AVC ($/unit)
TC ($)
ATC ($/unit)
MC ($/unit)
11
$858
$158
12
$90
$140
Q3: Complete the following table. Hint: Start with the first
row.
Q (units)
TFC ($)
TVC ($)
TC ($)
AFC ($/unit)
AVC ($/unit)
ATC ($/unit)
MC ($/unit)
0
$1,800
–
–
–
–
1...

Complete the following table accurately.
[5 Marks] Draw the TFC,
AFC and AVC in one graph
Q
TVC
TFC
TC
MC
ATC
AFC
AVC
0
0
100
1
20
2
38
3
51
4
62
5
75
6
90

Q3: Complete the following table. Hint: Start with the first
row.
Q (units)
TFC ($)
TVC ($)
TC ($)
AFC ($/unit)
AVC ($/unit)
ATC ($/unit)
MC ($/unit)
0
$1,800
–
–
–
–
1
$600
2
$400
3
$1,200
4
$2,800

Given the following information about a firm’s costs,
complete the following chart. Graph the TC, TFC and TVC on one
graph and directly below it (stack) a graph with the ATC, AFC, AVC
& MC.
Q
TC
TFC
TVC
ATC
AFC
AVC
MC
0
$2,500
--
25
20.00
50
$900
75
$49.33
100
15.00
125
$2,000
150
$5,050
175
$32.29
200
19.00

Given the following information about a firm’s costs,
complete the following chart. On one graph, show the TC, TFC and
TVC. On a separate graph, show the AFC, AVC, ATC, and
MC. You may use graph paper for this
question.
Q
TC
TFC
TVC
ATC
AFC
AVC
MC
0
--
50
10.00
100
9.00
150
8.00
200
12.00
7.00
250
6.00
300
7.00
350
8.00
400
9.00

A firm uses two inputs, capital K and labor L, to produce output
Q that can be sold at a price of $10. The production function is
given by Q = F(K, L) = K1/2L1/2 In the short run, capital is fixed
at 4 units and the wage rate is $5, 1. What type of production
function is F(K, L) = K1/2L1/2 ? 2. Determine the marginal product
of labor MPL as a function of labor L. 3. Determine the...

A firm produces output (y), using capital (K) and labor (L). The
per-unit price of capital is r, and the per-unit price of labor is
w. The firm’s production function is given by, y=Af(L,K), where A
> 0 is a parameter reflecting the firm’s efficiency.
(a) Let p denote the price of output. In the short run, the
level of capital is fixed at K. Assume that the marginal product of
labor is diminishing. Using comparative statics analysis, show that...

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...

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