This preview shows page 1. Sign up to view the full content.
Unformatted text preview: e) Draw the relationship between MC and AC. Prove that they always intersect at the minimum AC 4) Sam is thinking about starting a new business. He wants to produce shirts and sell them in a local market. The technology he faces is given by the following production function: Q=F(L)=10L 1/2 , where L is the number of people needed to produce Q shirts. Sam is a price taker not only in the shirt market but also in the labor market. The market price of shirts is estimated to be P=6 and the market wage rate is w=3. Compute the profitmaximizing number of shirts and how many people Sam should hire to produce them. (Don’t forget to check that profits are positive.) 5) Let 3 / 1 3 / 1 L K X ! = . Assume that both factors are variable. a) Derive the cost function. b) Find the amount of K and L necessary to produce X=100 when w=2 and r=1. c) Find the marginal and average cost functions....
View
Full
Document
This note was uploaded on 04/05/2009 for the course ECON 11 taught by Professor Cunningham during the Spring '08 term at UCLA.
 Spring '08
 cunningham
 Economics

Click to edit the document details