A firm has a Cobb- Douglas production function, q = ALaKß, where a + ß < 1. On the basis of this information, what properties does its cost function have? For example, a U. S. chemical firm has a production function of q = 10L0.32 K0.56 (based on Hsieh, 1995). If it faces factor prices of w = 10 and r = 20 and its capital is fixed at K = 100, what are its short-run cost, variable cost, average variable cost, and marginal variable cost functions? Plot these curves.
Answer to relevant QuestionsEquation 6.5 gives the short run variable cost function for Japanese beer as VC = 0.55q1.67. If the fixed cost is 600 and the firm produces 550 units, deter-mine the C, VC, MC, AFC, and AVC. What happens to these costs if ...The all-American baseball is made using cork from Portugal, rubber from Malaysia, yarn from Australia, and leather from France, and it is stitched (108 stitches exactly) by workers in Costa Rica. To assemble a baseball takes ...The United Kingdom started regulating the size of grocery stores in the early 1990s, and today the average size of a typical U. K. grocery store is roughly half the size of a typical U. S. store and two-thirds the size of a ...A firm has revenue given by R(q) = 100q – 3q2 and its cost function is C(q) = 100 + 10q. What is the profit-maximizing level of output? What profit does the firm earn at this output level? Each of the three firms in Question 3.3 has a revenue function R(q) = 100q – 2q2 and a cost function C(q) = 100 + 20q. Determine how much output each firm chooses. C
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