A firm that employs labor and capital has production function q = LK. Throughout this problem,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A firm that employs labor and capital has production function q = LK. Throughout this problem, the cost of capital is r = 1 and the cost of labor is w = 9. 1. What returns to scale does the production function exhibit? Demon- strate your answer. [3 marks] 2. Find the short-run cost function when capital is fixed at K = 3. Your answer should depend only on q. [3 marks] 3. Using the technique of Lagrange multipliers, find the long-run cost function. Your answer should depend only on q. [6 marks] 4. What economies of scale does the long-run cost function exhibit? Demonstrate your answer. [3 marks] A firm that employs labor and capital has production function q = LK. Throughout this problem, the cost of capital is r = 1 and the cost of labor is w = 9. 1. What returns to scale does the production function exhibit? Demon- strate your answer. [3 marks] 2. Find the short-run cost function when capital is fixed at K = 3. Your answer should depend only on q. [3 marks] 3. Using the technique of Lagrange multipliers, find the long-run cost function. Your answer should depend only on q. [6 marks] 4. What economies of scale does the long-run cost function exhibit? Demonstrate your answer. [3 marks]
Expert Answer:
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
Posted Date:
Students also viewed these economics questions
-
Business Application: Valuing Land in Equilibrium: Suppose we consider a Robinson Crusoe economy with one worker who has preferences over leisure and consumption and one firm that uses a constant...
-
Read the following article and answer the questions below: Building Competitive Advantage Through People Magazine: Winter 2002Research Feature January 15, 2002 Reading Time: 23 min Christopher A....
-
Fixed amount of Land for Oil Drilling: Suppose that your oil company is part of a competitive industry and is using three rather than two inputslabor , capital k and land L to produce barrels of...
-
During February, Vargas Company worked on three jobs. Data relating to these three jobs follow: Overhead is assigned on the basis of direct labor hours at a rate of $5.30 per direct labor hour....
-
Argon gas expands in an adiabatic turbine from 3 MPa and 750C to 0.2 MPa at a rate of 5 kg/s. The maximum power output of the turbine is (a) 1.06 MW (b) 1.29 MW (c) 1.43 MW (d) 1.76 MW (e) 2.08 MW
-
Comparative financial statements for Na Pali Coast Company for the years ending December 31, 20-1 and 20-2 are provided. REQUIRED 1. Perform horizontal analysis of the comparative income statement...
-
Presented here is information for Eliason, Inc., for the year ended August 31,2010. Beginning: Assets. Liabilities... Ending: Assets....... Liabilities. Stockholders' Equity: Sale of Stock .............
-
Part 1 The framework created by Professor Sidney Gray in 1988 to explain the development of a country's accounting system is presented in the chapter in Exhibit 2.8. Gray theorized that culture has...
-
Pharoah Company, organized in 2 0 2 4 , has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2 0 2 5 . 1 / 2 / 2 5...
-
Which bond in Exhibit 1 most likely has the lowest effective convexity? A. AI bond B. BI bond C. CE bond Jules Bianchi is a bond analyst for Maneval Investments, Inc. Bianchi gathers data on three...
-
Below is some actual data for call options on Netflix (NFLX) from November 27, 2023. The options expire on January 19, 2024. NFLX's most recent closing price was $479.17, and the 1-month treasury...
-
Having discussed stress and engagement, it is notable that there is research to suggest that engagement and positive outcomes are not always related.105 In fact, some of a firms best-performing...
-
While mainstream perspectives see teams as a neutral way of designing work in organisations, a critical perspective sees teams as a way to create, maintain and reproduce unequal power relations.133...
-
What is your dollar VaR when holding a UK portfolio of 100m if the current exchange rate is \($1.5\) per , the correlation between the return on the UK portfolio and the exchange rate is = 0.5, the...
-
If the required takeoff speed of a particular airplane is \(120 \mathrm{mi} / \mathrm{hr}\) at sea level, what will be required at Denver (elevation \(5000 \mathrm{ft}\) )? Use properties of the U.S....
-
(a) Explain the terms : melting point, boiling point and critical point. (b) State the difference between (i) Superheated steam and wet steam. (ii) Sensible heat of water and latent heat of...
-
The adjusted trial balance for Larkspur, Inc. is given below Larkspur, Inc. Trial Balance August 31, 2020 Cash Accounts Receivable Supplies Prepaid Insurance Equipment Accumulated...
-
The Taylor's series expansion for cosx about x = 0 is given by: where x is in radians. Write a user-defined function that determines cosx using Taylor's series expansion. For function name and...
-
In the labor market, we can also talk about responsiveness or elasticity with respect to wages (and other prices) on both the demand and supply sides. A: For each of the following statements,...
-
Suppose you consider the savings decisions of three households - households 1, 2 and 3. Each household plans for this years consumption and next years consumption, and each household anticipates...
-
Suppose you are asked to model the savings decisions of a household that has an income of $100,000 this year but expects to have no income a period into the future. A. Suppose the interest rate is...
-
The correlation coefficient for X and Y is known to be zero. We then can conclude that: a. X and Y have standard distributions b. the variances of X and Y are equal c. there exists no relationship...
-
Suppose that college grade-point average and verbal portion of an IQ test had a correlation of .40. What percentage of the variance do these two have in common? a. 20 b. 16 c. 40 d. 80
-
If the correlation between age of an auto and money spent for repairs is +.90 a. 81% of the variation in the money spent for repairs is explained by the age of the auto b. 81% of money spent for...
Study smarter with the SolutionInn App