You work for a firm that has a 40% market share in the industry. Market research you performed says that total demand for the product is 200,000 units. Given that the total cost function is the following:

 TC = 4,800 K + 100 L 

The production function that you derived for the firm is the following: 

 Q = 4 K^0.7 L^0.3

Solve for the optimal units of labor (L) and capital (K) which will lead the firm to minimize its total cost using the Lagrangian Multiplier Method. What is the minimum level of total cost?

What would happen if there is a shift in the industry which increases the firm's market share from 40% to 45%? How does it affect your total cost?

Answer rating: 100% (QA)

1 The firms market share is 40 of the total demand of 200000 units So the firms d... View the full answer