Question: Consider a firm with long - run production function Q = f ( L , K ) = 3 L ^ ( 1 / 2
Consider a firm with longrun production function
QfLKLK
where Q is output, L measures labor input, and K measures capital input.
Input prices are w and r per unit of labor and capital, respectively.
At the given factor prices, what is the firms longrun cost as a function of output, CQ
Compute the firms longrun marginal cost and average cost curves at the given factor prices, MCQ and ACQ respectively?
In the shortrun capital is fixed at level K Find the firms shortrun total cost, shortrun marginal cost, and shortrun average cost curves, STCQ;K SMCQ;K SATCQ;K respectively?
Now consider some comparative statics properties as parameters change only change one parameter at a time and consider the other parameters unchanged from the problem above
How would your answers to parts and change if the firm faced input price r for capital instead of r Here w remains unchanged
How would your answers to parts and change if the firm faced input price w for labor instead of w Here r remains unchanged
How would your answers to part change if the firms capital level were fixed at K instead of K Here w and r remain unchanged
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