econ_256_problem_set_4

econ_256_problem_set_4 - Econ 256 Intermediate...

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Intermediate Microeconomics Professor Ranganath Murthy Bucknell University, Summer 2005 PROBLEM SET 4 Due June 29, 2005 (1) Please use the graph provided. Your graphs should be accurate . (1) The “price of labor” ( w ) is $2 and the “price of capital” ( r ) is also $2. Draw the isocost lines for the following levels of costs: $20, $40, $60, $80, and $100. (2) What combination of K and L should the producer use to minimize the total cost of producing: 10 units of output? ______________________________________________. 20 units of output? ______________________________________________. (3) Draw the expansion path . (4) Characterize the returns to scale . That is, are returns to scale increasing , decreasing , or constant ? State the reason for your answer . ( Hint : Look at your answers to part (2). ) (5) Complete the following table: Output Total Cost Average Total Cost 10 20 (6) Will Marginal cost be above, below, or the same as Average Total Cost? Without actually computing the marginal cost , state the reason for your answer . 1
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This note was uploaded on 04/14/2008 for the course ECON 256 taught by Professor ?? during the Summer '05 term at Bucknell.

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econ_256_problem_set_4 - Econ 256 Intermediate...

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