Short run costs-find the cost minimizing capital-labor ratio

Assignment Help Business Economics

Reference no: EM13817208

Short Run Costs

1. A firm’s short-run cost function is C(q)=200q-6q^2+0.3q^3+400. Determine the fixed cost, F; the variable cost function, AVC; the average cost, AC; the marginal cost, MC; and the average fixed-cost, AFC. (Mathematical problem)

2. A firm’s cost curve is C=F+10q-bq^2+q^3, where b > 0.

a. For what values of b are cost, average cost, and average variable cost positive? (From now on, assume that all these measures of cost are positive at every output level).

b. What is the shape of the AC curve? At what output level is the AC minimized?

c. At what output levels do the MC curve cross the AC and the AVC curves?

d. Use calculus to show that MC curve must cross the AVC at its minimum point. (mathematical problem).

3. A firm has two plants that produce identical output. The cost function are C1=10q-4q^2+q^3 and C2=10q-2q^2+q^3.

a. At what output level does the average cost curve of each plant reach its minimum?

b. If the firm wants to produce four units of output, how much should it produce in each plant? (mathematical problem).

Long Run Costs

4. Replace the production function in Solved Problem 7.4 with a Cobb-Douglas q=AL^aK^b, and use calculus to find the cost minimizing capital-labor ratio. (mathematical problem).

Challenge

5. A US apparel manufacturer is considering moving its production abroad. Its production function is q=L^0.7K^0.3 (based on Hsieh, 1995). In the United States, w=7 and r=3. At its Asian plant, the firm will pay a 50% lower wage and a 50% higher cost of capital: w=7/1.5 and r=3X1.5. What are L and K, and what is the cost of producing q=100 units in both countries? What would be the cost of production in Asia if the firm had to use the same factor quantities as in the United States? (mathematical problem).

Reference no: EM13817208

Questions Cloud

Enforcement costs are critical to success of environmental : A cost-effective policy is always socially efficient. Enforcement costs are critical to the success of environmental program and should be included in the overall social costs of the program when evaluating different policy options

Tuberculosis in the work environment : Tuberculosis in the Work Environment

System of floating exchange rates : Assume that economic growth is slower in the United States than in its trading partners. Given a system of floating exchange rates, will the impact of this growth differential be for the United States with respect to exports and the value of the doll..

Short run costs-find the cost minimizing capital-labor ratio : A firm’s short-run cost function is C(q)=200q-6q^2+0.3q^3+400. Determine the fixed cost, F; the variable cost function, AVC; the average cost, AC; the marginal cost, MC; and the average fixed-cost, AFC. (Mathematical problem) Replace the production f..

Do people have right to end their lives whenever they choose : Do people have a right to end their lives whenever they choose to? Can people be mistaken about whether their life has value and ought to be ended?

Assignment on employee pay procedure manual : Employee pay procedure manual

Difference in the ethical behavior of companies : Write a 350-word response to the following: Do you think the Sarbanes-Oxley Act has made a difference in the ethical behavior of companies regarding their financial accounting? Why or why not?

Explain the potential personal liability to acme fireworks : Analyze whether the owner formed a contract with the businesses, and apply the five essential elements of an enforceable contract. Explain the potential personal liability to Acme Fireworks if a spectator is injured by a stray firework from a fir..

User Account

All Pages