Question

In: Economics

Assume that output is given by Q(L,K)=50L^0.5K^0.5 with price of labour L = w and price...

Assume that output is given by Q(L,K)=50L^0.5K^0.5 with price of labour L = w and price of capital K = r

a

Use the primal formulation of minimising costs to obtain the demand for Labour L and capital K

2

b

Using the values of L & K obtained above, verify whether the output Q equals the one given in the question by eliminating the values of w and r. Are the primal and dual problems leading to the same answer?

2

c

What is the total cost for producing Q?

1

d

What is the average and marginal cost for producing Q?

1

e

If capital in the short run is fixed at Kwhat is the short-run total cost?

1

f

Write the values for the derivatives of the Total cost with respect to w and r. Does Shephard’s lemma hold in this case?

1

Solutions

Expert Solution


Related Solutions

Assume that output is given by Q(L,K)=50 K^0.5 L^0.5 with price of labour L = w...
Assume that output is given by Q(L,K)=50 K^0.5 L^0.5 with price of labour L = w and price of capital K = r 1.If capital in the short run is fixed at K what is the short-run total cost? 2.Write the values for the derivatives of the Total cost with respect to w and r. Does Shephard’s lemma hold in this case?
Assume that output is given by with price of labour L = w and price of...
Assume that output is given by with price of labour L = w and price of capital K = r 1.If capital in the short run is fixed at what is the short-run total cost? 2.Write the values for the derivatives of the Total cost with respect to w and r. Does Shephard’s lemma hold in this case?
2. A firm’s production function is given by q= L^1/2+ K. The price of labour is...
2. A firm’s production function is given by q= L^1/2+ K. The price of labour is fixed at w = 1, and the price of capital is fixed at r = 8. a. Find the firm’s marginal rate of technical substitution. b. Suppose both labour and capital can be varied by the firm, and that the firm wishes to produce q units of output. Use the answer to (a) to find the cost-minimising amounts of labour and capital (as functions...
A Korean electronic chip manufacturer has a production function given by Q=L^(0.5)K^(0.5). Assume the Wage rate...
A Korean electronic chip manufacturer has a production function given by Q=L^(0.5)K^(0.5). Assume the Wage rate is $45 and the cost of capital is $60. Use the Excel to determine the amount of capital, K, needed to produce 20 units of output for each value of labor, L. starting from L=2 and going to 40 in increments of 1. Plot this isoquant and upload your excel sheets. A Korean electronic chip manufacturer has a production function given by Q=L^(0.5)K^(0.5). Assume...
6. Suppose the production function is given by Q=1/20*L^1/2*K^1/4;price of labor(w) = 0.50 and price of...
6. Suppose the production function is given by Q=1/20*L^1/2*K^1/4;price of labor(w) = 0.50 and price of capital (r) = 4: The market price for the output produced is P= 560: (a) Short-run production: ii. Write down this firm's LONG-RUN cost minimization problem. [Note: In long-run, nothing is fixed, so the firm can choose both labor and capital optimally to minimize its cost.] iii. Solving the long-run cost minimization problem, we get the long-run cost function C(Q) = (12)*(5Q)^4/3: Find out...
Suppose that output Q is produced with the production function Q = f(K;L), where K is...
Suppose that output Q is produced with the production function Q = f(K;L), where K is the number of machines used, and L the number of workers used. Assuming that the price of output p and the wage w and rental rate of capital r are all constant, what would the prot maximizing rules be for the hiring of L and K? (b) What is theMRTSK;L for the following production function: Q = 10K4L2? Is this technology CRS, IRS or...
Suppose that output Q is produced with the production function Q = f(K,L), where K is...
Suppose that output Q is produced with the production function Q = f(K,L), where K is the number of machines used, and L the number of workers used. Assuming that the price of output p and the wage w and rental rate of capital r are all constant, what would the profit maximizing rules be for the hiring of L and K? (b) What is the MRTSK,L for the following production function: Q = 10K4L2? Is this technology CRS, IRS...
Suppose an individual’s weekly labour supply is given by L = -10 + w, where L...
Suppose an individual’s weekly labour supply is given by L = -10 + w, where L is labour supply in hours and w is the hourly after-tax wage. Assume that firms are willing to pay a before-tax wage of $40/hr. In the absence of taxation, how many hours per week will the individual work? What are weekly earnings? Illustrate the choice in a diagram. [4] Suppose the government institutes a 25% tax on labour income. What is the after tax...
2) Mary opens up a shop making flip-flops. Let: q(L,K) = sqrt(L)sqrt(2K) w = price of...
2) Mary opens up a shop making flip-flops. Let: q(L,K) = sqrt(L)sqrt(2K) w = price of labor per unit = $5 r = price of capital per unit = $15 p = price of flip-flops per unit= $5 a) Suppose Mary contracts on 50 units of flip-flop making machinery (kapital)… what is her optimal Labor demand in the short run i.e. what quantity of labor (L) should she hire if capital is fixed at K = 50? b) Suppose wage...
Consider a producer making choices over two inputs, labour (l) and capital (k) with prices w...
Consider a producer making choices over two inputs, labour (l) and capital (k) with prices w = 3 and r = 1. The production technology is f(l, k) = l + 3k. What is the marginal rate of technical substitution (MRTS)? Is there diminishing MRTS? Find the input demands in long-run (as a function of output level)? Find the long-run total cost, marginal cost, and average cost functions? Do the properties of a typical cost function hold for the long...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT