Suppose the technology for gizmo production is q = {4+24KL + 2K + 8L}/2, and in...

   

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Suppose the technology for gizmo production is q = {4+24√KL + 2K + 8L}¹/2, and in the short run there are 100 firms in this market. Besides the production cost these firms also have a fixed cost of F = 37 for having a retail outlet, since they sell their gizmos in the retail market. Suppose that the factor prices are v = 2 and w = 8. (a) If all factors are variable (LR), find the cost for gizmo production for each firm. What is the individual (LR) supply for each firm and what is the (LR) supply for the industry as a whole with the 100 firms? (b) If this is a constant cost industry, what is the (VLR) very long run supply (entry and exit allowed) for this industry? Now suppose that demand in the gizmo market from the last question is 5000 - 50P. (a) What is the market equilibrium in the initial situation where there are 100 firms in the market (LR)? (b) What is the very long run equilibrium (allow entry and exit)? (c) Now suppose that the number of firms in the gizmo business affects the fixed cost of the gizmo retail outlets: F = 3N. What is the very long run supply in the gizmo market? And what is the very long run equilibrium? [Here the numbers may not work out to very simple values. Please give a good approximation to the solutions.] Suppose the technology for gizmo production is q = {4+24√KL + 2K + 8L}¹/2, and in the short run there are 100 firms in this market. Besides the production cost these firms also have a fixed cost of F = 37 for having a retail outlet, since they sell their gizmos in the retail market. Suppose that the factor prices are v = 2 and w = 8. (a) If all factors are variable (LR), find the cost for gizmo production for each firm. What is the individual (LR) supply for each firm and what is the (LR) supply for the industry as a whole with the 100 firms? (b) If this is a constant cost industry, what is the (VLR) very long run supply (entry and exit allowed) for this industry? Now suppose that demand in the gizmo market from the last question is 5000 - 50P. (a) What is the market equilibrium in the initial situation where there are 100 firms in the market (LR)? (b) What is the very long run equilibrium (allow entry and exit)? (c) Now suppose that the number of firms in the gizmo business affects the fixed cost of the gizmo retail outlets: F = 3N. What is the very long run supply in the gizmo market? And what is the very long run equilibrium? [Here the numbers may not work out to very simple values. Please give a good approximation to the solutions.]

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Part 1 a The cost for gizmo production for each firm is given by C 4v 24KL 2K 8L F Substituting the ... View the full answer