2. Warner provides broadband service in Surf City. The production function for Warner is given by the
Question:
2. Warner provides broadband service in Surf City. The production function for Warner is given by the following: =Q = f(L,K)=L^(.4)K^(.6) where L represents man-hours, K represents machine hours and output Q is measured in households served. The input prices for L and K are w and r respectively.
please answer e-g especially, that's where I am getting lost mostly
a) Set up and solve the cost minimization problem to determine the (compensated) factor demands for labor and machines. Assume that the w = $20 per hour and r = $30 per hour.
b) Show that VC(Q) = 50Q at these input prices. Assume that the fixed costs of Warner are $800.
c) Given the fixed costs what are the average costs of Warner? What is the marginal cost curve of Warner? Illustrate the two cost curves.
d) For what values of Q do Warner's cost curves exhibit "scale" economies? Because of Warner's cost structure, it is a monopolist in Surf City. Inverse demand for broadband in Surf City is given by P = 150 - 2Q where P is the price of serving a household.
e) Given its cost structure and the market demand, how many households will Warner choose to serve? What price will it charge?
f) In your cost diagram for part (c) illustrate the demand curve and marginal revenue curve for this market. Indicate the profit-maximizing price and quantity that you found in part (e).
g) In your diagram for part (c) illustrate the profits of Warner at the profit
maximizing price and quantity