# Question

In the short run, a perfectly competitive firm produces output using capital services (a fixed input) and labor services (a variable input). At its profit-maximizing level of output, the marginal product of labor is equal to the average product of labor.

a. What is the relationship between this firm’s average variable cost and its marginal cost? Explain.

b. If the firm has 10 units of capital and the rental price of each unit is $4/ day, what will be the firm’s profit? Should it remain open in the short run?

a. What is the relationship between this firm’s average variable cost and its marginal cost? Explain.

b. If the firm has 10 units of capital and the rental price of each unit is $4/ day, what will be the firm’s profit? Should it remain open in the short run?

## Answer to relevant Questions

The demand for gasoline is P = 5 - 0.002Q and the supply is P = 0.2 + 0.004Q, where P is in dollars and Q is in gallons. If a tax of $1/ gal is placed on gasoline, what is the incidence of the tax? What is the lost consumer ...If the short- run marginal and average variable cost curves for a competitive firm are given by SMC = 2 + 4Q and AVC = 2 + 2Q, how many units of output will it produce at a market price of 0? At what level of fixed cost will ...Now suppose the monopolist in Problem 2 also has access to a foreign market in which he can sell whatever quantity he chooses at a constant price of 60. How much will he sell in the foreign market? What will his new quantity ...Suppose A and B know that they will interact in a prisoner’s dilemma exactly four times. Explain why the tit-for-tat strategy will not be an effective means for assuring cooperation.A population consists of two types, “friendlies” and “aggressives.” Each individual interacts with a randomly chosen member of the population. When two friendlies interact, each earns 3 units. When two aggressives ...Post your question

0