Company A uses 3 inputs (x 1 ,x 2 ,x 3 ) to produce output Q Nothing is produced unless some amount of input X 3 is utilized At the current level of X 3 , the output Q is produced according to the production function Q x 1 1 2 x 2 1 2 Denote the input prices by (W 1 ,W 2 ,W 3 ) and assume the level...

To derive the firms total cost equation we first need to define the cost function The cost of produc ...

Company A uses 3 inputs (x 1 ,x 2 ,x 3 ) to produce output Q. Nothing

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Question:

Company A uses 3 inputs (x₁,x₂,x₃) to produce output Q. Nothing is produced unless some amount of input X₃ is utilized. At the current level of X₃, the output Q is produced according to the production function

Q = x₁^1/2x₂^1/2

Denote the input prices by (W₁,W₂,W₃) and assume the level of X₃ cannot be varied in the time period under consideration but that X1 and X₂ can be varied to whatever levels the firm desires.

1. Derive this firm’s total cost equation.
2. Derive and accurately graph this firm’s marginal and average cost curves.