Mario produces hammers using the production function q = 2min[L, K]. Input prices are w =...

 

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Mario produces hammers using the production function q = 2min[L, K]. Input prices are w = 2,r = 4. He also has a fixed cost of production, F = 100. (a) [20 points] Solve for Mario's cost function, C(q). Whatis his average variable cost function, AVC(q)? (b) [10 points] Suppose the price of labor increases so that w average variable cost function. (c) [20 points] Draw a diagram illustrating Mario's cost minimization problem assuming he wants to produce 2 units of output and with the original input prices w = ically, draw a properly labeled isoquant and isocost curve (labeled with their values) rep- resenting the solution to the cost minimizing problem. Add an additional and properly labeled isocost curve corresponding to the new solution under the new prices w r = 4. 4. Solve for Mario's new 2, r 4. Specif- 4, Mario produces hammers using the production function q = 2min[L, K]. Input prices are w = 2,r = 4. He also has a fixed cost of production, F = 100. (a) [20 points] Solve for Mario's cost function, C(q). Whatis his average variable cost function, AVC(q)? (b) [10 points] Suppose the price of labor increases so that w average variable cost function. (c) [20 points] Draw a diagram illustrating Mario's cost minimization problem assuming he wants to produce 2 units of output and with the original input prices w = ically, draw a properly labeled isoquant and isocost curve (labeled with their values) rep- resenting the solution to the cost minimizing problem. Add an additional and properly labeled isocost curve corresponding to the new solution under the new prices w r = 4. 4. Solve for Mario's new 2, r 4. Specif- 4,

Answer rating: 100% (QA)

a Total Cost wLrK Fixed Cost Cq 1002L4K at expansion path it is true that L K 05q S... View the full answer