Fixed proportions production function

Reference no: EM13698978

Suppose that a company has a fixed proportions production function that requires it to use two machines and one worker to produce 1000 units per hour.

A) Explain why the cost per hour of producing 1000 units is 2v+w (where v is the hourly rent for the machines and w is the hourly wage).

B) Assume the company can produce any number of units they want using this technology. Explain why the cost function in this case would be TC=q(2v+w), where q is output of units per hour, measured in thousands of units.

C) What is the average and marginal cost of unit production (again, measure output in thousands of units)?

D) Graph the average and marginal cost curves for units assuming v=3, w=5.

E) Now graph these curves for v=6, w=5. Explain why these curves have shifted.

Reference no: EM13698978

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