ps5x313_f08 - the following long run total cost function:...

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1. A competitive firm uses two variable factors to produce its output, with a production function x = min {K, L} . The unit price of K is $8 and the unit price of L is $5. Due to a lack of warehouse space, the company cannot use more than 10 units of K. The firm must pay a fixed cost of $80 if it produces any positive amount but doesn't have to pay this cost if it produces no output. What is the smallest integer price that would make a firm willing to produce a positive amount? 2. Suppose that Dent Carr's long-run total cost of repairing s cars per week is: lrtc(s) = 3s 2 + 12 . If the price he receives for repairing a car is $24, then in the long run, how many cars will he fix per week if he maximizes profits? 3. Suppose a representative firm in a perfectly competitive, constant cost industry has
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Unformatted text preview: the following long run total cost function: lrtc(x) = 4x 2 + 100x + 100. a) What is the long run equilibrium price for this industry? b) If market demand is given by the function X D = 1000 P, where P denotes price, how many firms will operate in this long run equilibrium? 4. Illustrate how all four points on the isoquant/isocost diagram at the right would be represented on a diagram representing total cost functions - both long-run and short-run. Assume L and K are the only two inputs in the production function. Econ 3130 Fall 2008 PS#5-XtraQ DUE at the start of class on Wednesday November 5 L K x x 1 2 A B C D...
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