Total cost function, Microeconomics

A firm's production function is given by Q = √LK . The price of labour is w and the price of capital is r.

a. The price of labour is $5 and the price of capital is $20. What is the cost minimising combination of labour and capital if the firm wants to produce 1000 units per year?

b. Derive the total cost function, as a function of Q, w and r.Substitute the values w = $5 and r = $20 into the cost function and illustrate LRTC(Q), LRAC(Q) and LRMC(Q) using a suitably labelled diagram (LR = long run). Why is the LRTC function shaped the way it is?

c. Now assume that capital is fixed at K' , derive the short run total cost function, using w = $5 and r = $20.Illustrate the SRTC(Q), SRAC(Q) and the SRMC(Q) functions using a suitably labelled diagram (SR = short run).

Posted Date: 3/30/2013 6:16:53 AM | Location : United States







Related Discussions:- Total cost function, Assignment Help, Ask Question on Total cost function, Get Answer, Expert's Help, Total cost function Discussions

Write discussion on Total cost function
Your posts are moderated
Related Questions
Consider a television manufacturer based in Korea. It produces TVs in Korea at a total cost of Y 2 + 2 Y where Y is the number of televisions they produce in Korea. It can als

The Effect of Effluent Fees on the Firms' Input Choices *  Firms which have a by-product to production produce an effluent. *  An effluent fee is a per unit fee which firms

The elasticity coefficient is a number measured using price and quantity data to verify how responsive consumers are to changes in the price of a commodity.  The elasticity coeffic

THEORY OF REVEALED PREFERENCE: If consumer's taste and preferences do  not change, then observation of her market behaviour or, actual act of choice between the commodity sets

Determine the population growth rates Birth control meant that those who didn't wish to have more children can exercise their choice. Parents began to find more satisfaction o

I have to make a research paper project on Investigating the buying behavior of individuals in the white goods sector and seeing if there exists any negative relationship between d

Consider an economy with high innovative potential, but where saving is insufficient to fund innovative investments. Use Garrison's capital-based macroeconomics to explain how more

what is marginal costs?

give assumption, rules/formulas and demonstrate that ramsey prices are the seconnd best pricing. explain clearly.

Determine Optimal Price, Quantity and Economic Profit A firm has a demand function P = 200 – 5Q and cost function:  AC=MC=10 and a potential entrant has a cost function: AC=MC