Find the firm short run cost function

Assignment Help Business Economics

Reference no: EM131378485

A firm's production function is qi = 0.2*Ki^(0.6)Li^(0.4). The wage rate in this area is w = $15, and the cost of capital is r = .05.

a. Find the firm's short run cost function, if Ki is fixed at $100,000.

b. If the good is exported around the world at a price of $100, what is the firm's optimal output, and what is its profit or loss? (We would describe this as "perfectly elastic demand" for this good)

c. Now suppose that the price is not known. Derive the firm's short run supply function qi (P). (hint, follow the same steps as in b, but replace the $100 value with the variable, P)

d. Now imagine that time passes, such that Ki can be adjusted to reflect market conditions. What is the firm's long run cost function? What is its long run supply function? How much would it produce if P=$100? What would be its profit or loss?

Reference no: EM131378485

Questions Cloud

Provide for markets to survive and function efficiently : Most economists agree that markets do a good job of organizing trade, domestic and foreign. What conditions must a government provide for markets to survive and function efficiently?

Competes in perfectly competitive market : If Will’s Print Shop competes in a perfectly competitive market and he charges $10 per printing job, what is the marginal revenue of his 3rd print job? If Mara’s Puzzle Factory is operating at a quantity in which the marginal revenue from the last pu..

Analysis of potential supply chain locations : Briefly describe what we mean by an EPIC analysis of potential supply chain locations. Explain your answer in terms of the countries that you analyzed for your tests and projects.

Explain marketing strategy in terms of the interplay : Explain marketing strategy in terms of the interplay between culture and human nature. Start with the premise that the intent of marketing strategy is to influence the behavior of potential customers and the premise that human nature has much in comm..

Find the firm short run cost function : A firm's production function is qi = 0.2*Ki^(0.6)Li^(0.4). The wage rate in this area is w = $15, and the cost of capital is r = .05. Find the firm's short run cost function, if Ki is fixed at $100,000. If the good is exported around the world at a p..

Should jared shut down his business immediately : Jared runs a personal training studio and earned $5,000 last month. His fixed costs are $4,000 and variable costs are $3,500. Should Jared shut down his business immediately? Dimitri has several apple trees in his yard, and apples are a perfectly com..

Determine the market short-run supply curve : A competitive market is made up of 100 identical firms. Each firm has a short-run marginal cost function as follows: MC 0.5Q where Q represents units of output per unit of time. Determine the market short-run supply curve. Calculate the price that wo..

When households and firms become more pessimistic : Which of the following likely occurs when households and firms become more pessimistic?

Recessions will often result in government budget deficit : An increase in income tax rates will always result in an increase in government tax revenues. Recessions will often result in a government budget deficit. Compare the traditional view versus the view of Ricardian equivalence of the effects of a debt-..

User Account

All Pages