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
What population information is needed by local authorities to provide the right number of primary and secondary school places? How would such information affect the plans of the lo

Ask queBrenda owns a construction company that employs bricklayers and other skilled tradesmen. Her firm''s MRP for bricklayers is $22.25 per hour for each of the first seven brick

critically analysis firm theory of profit maximization?


1. An investment in flood control infrastructure  today will generate $1,000,000 in benefits 10 years from today. Using a 3% discount rate what is the present value of these benefi

Derivation Of Ordinary Demand Function: Suppose,   and q 1  = (Q 1 1 , Q 2 1 ,..., Q n 1 )T. Let M0 be the money income and p 0 q 0  = M 0  and p 0 q 0 ≥ p 0 q 1 , where p

discuss the trend and composition of national income and per capital income

hoe does the knowledge of price elasticity of demand important to the government

how distribution is arranged to provide customer service

Returns to Scale in Carpet Industry *  The carpet industry has grown from the small industry to large industry with some large firms. *  Question - Can the growth be illu