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
Measured cell emf are the basis for standard electrode potentials. chemistry assignments A method for the presentation of the data obtained from measurements of the equilibrium


Why some country saving less and consumption more?

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4


Negative profit  FC + VC > R(q) MR > MC    Indicates higher profit at the higher output - Question: Why is profit negative when the output is zero? - Outp

You are a member of a problem solving group that is concerned with incidents involving losses with their information system (IS). Let us assume that IS loss events can be grouped i

what is mrs

project on visit to village for agriculturebased project

What are economies of scale and diseconomies of scale?  In economics, returns to scale and economies of scale are terms that are related and sometimes incorrectly used intercha