Let the long-run total cost function be LTC = (1/12) Qw 0.5 r 0.5. a. Demonstrate that

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Let the long-run total cost function be LTC = (1/12) Qw 0.5 r 0.5.

a. Demonstrate that a doubling of input prices causes LTC to double.

b. Find the elasticity of total cost. This long-run total cost function is characterized by ___________ scale.

c. Let w = $16 and r = $25, and find LMC and LAC. Graph the LMC and LAC curves. Are these curves consistent with part b?

d. Is your answer to part b consistent with your answer to part d in Mathematical Exercise 4 in Chapter 9?

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Managerial Economics Foundations of Business Analysis and Strategy

ISBN: 978-0078021718

11th edition

Authors: Christopher Thomas, S. Charles Maurice

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Question Posted: Nov 18, 2014 04:21 AM

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Let the long-run total cost function be LTC = (1/12) Qw 0.5 r 0.5. a. Demonstrate that

Question:

Step by Step Answer:

a Yes because the exponents on w and r sum to one Thus LTC Q 2 w 2 r 112 Q 2 w 05 ...View the full answer

Managerial Economics Foundations of Business Analysis and Strategy

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