A firm's production function is given by Q = (L 2)(K 1) where L...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
A firm's production function is given by Q = (L − 2)(K − 1) where L ≥ 2 and K≥ 1. The price of labor is w and the price of capital is r. a) Suppose capital is fixed at K = 4 in the short run. Derive the short-run total cost function. b) Suppose the firm can choose labor and capital freely. That is, consider the scenario in the long run. Derive the demand function for labor and capital respectively using the Lagrange multiplier method. c) Derive the long-run total cost function. In the long run, if w = r, is the total expenditure on labor the same as the total expenditure on capital? If not, which is higher? A firm's production function is given by Q = (L − 2)(K − 1) where L ≥ 2 and K≥ 1. The price of labor is w and the price of capital is r. a) Suppose capital is fixed at K = 4 in the short run. Derive the short-run total cost function. b) Suppose the firm can choose labor and capital freely. That is, consider the scenario in the long run. Derive the demand function for labor and capital respectively using the Lagrange multiplier method. c) Derive the long-run total cost function. In the long run, if w = r, is the total expenditure on labor the same as the total expenditure on capital? If not, which is higher?
Expert Answer:
Answer rating: 100% (QA)
a The shortrun total cost function is given by TC wL rK As capital is fixed ... View the full answer
Related Book For
Probability and Statistics for Engineers and Scientists
ISBN: 978-0495107576
3rd edition
Authors: Anthony Hayter
Posted Date:
Students also viewed these economics questions
-
Plant acquisitions for selected companies are as follows: 1. Bella Industries Inc acquired land, buildings, and equipment from a bankruptcy company, Torres Co., for a lump-sum price of $700 000. At...
-
A food manufacturer claims that at the time of purchase by a consumer the average age of its product is no more than 120 days. In an experiment to test this claim a random sample of 36 items are...
-
(Lump-sum acquisition) The Allred Shipping Co. acquired land, buildings, and equipment at a lump-sum price of $920,000. An appraisal of the assets at the time of acquisition disclosed the following...
-
In Exercises find the indefinite integral. sech(2x1) dx
-
Establish the following generalized version of Theorem 3 (the Minkowski inequality). Namely, show that for any n (( 2) r.v.s X1,..., Xn and any r ( 1. It holds that
-
Show that Remark 22.5.a) remains valid if we replace \(f(x)\) by \(f(s, x)\). 22.5 Remark. a) The Stratonovich integral satisfies the classical chain rule. Indeed, if fe e(R) and dX = (t) dB + b(t)...
-
Continuing to focus on evidence associated with the act, concealment, and conversion, use the evidentiary material to continue the examination. In addition, the examiner also starts to think of terms...
-
The following events apply to Montgomery Company for 2016, its first year of operation: 1. Received cash of $36,000 from the issue of common stock. 2. Performed $48,000 of services on account. 3....
-
help me respond to this, Can I request a little insight on this zoom meetings attendees and the intended end result? Will this information conclusion be going back to the County auditors in a report?...
-
All cash flows occur at the end of the period. 1. What is the annual interest rate, if $1,000 grows to $1,338 over 5 years? (4) remember to use opposite signs on the payment and present values 2....
-
Explain how the CAMELS ratings are used to evaluate the performance of a bank. Two banks (Dhaka Bank & Prime Bank) have been selected for you so between these two banks which one is performing better...
-
What does the term ROI mean?
-
Mr. Ashok does not keep his books properly. Following information is available from his books. During the year Mr. Ashok sold his private car for Rs. 50,000 and invested this amount into the...
-
What are some types of current assets that might be pledged as security for short-term loans?
-
What is the difference between an underwritten and a best efforts issue?
-
Explain the situations in which each of the risk typesstand-alone, corporate, and marketare relevant.
-
Venator fund has a 5% front load. The fund had 13.1% return over the last 5 years. What is the actual annual return for investor invested in the fund for 5 years?
-
What is the expected payoff of an investment that yields $5,000 with a probability of 0.15 and $500 with a probability of 0.85? Select one: O a. $325 O b. $5,500 O c. $2,750 O d. $1,175
-
A fair die is rolled live times. What is the probability that the first score is strictly larger than the second score which is strictly larger than the third score which is strictly larger than the...
-
A new radar system is being developed to detect packages dropped by airplane. In a series of trials, the radar detected the packages being dropped 35 times out of 44. Construct a 95% lower confidence...
-
Recall that Var(aX + b) = a2Var(X) and Var(X1 + X2) = Var(X1) + Var(X1) if the random variables X1 and X2 are independent. Use these results to show that Var(a1X1 + ... + anXn + b) = a12Var(X1) + ......
-
Lana Priest set up a home sewing business on 1 July 2019. Usually, Lana collects $20 per hour for sewing on the completion of each days work and pays for the maintenance of her machine with cash....
-
Craigs Car Detailing Service had the following accounts and account balances in the adjusted trial balance columns of its worksheet for the year ended 30 June 2019. Required (a) Record the required...
-
The accounts below are taken from the ledger of Bartel Music Consulting on 30 June 2019, the end of the current financial year. Required (a) Record the closing entries that affected the accounts. (b)...
Study smarter with the SolutionInn App