Homework-6

Homework-6 - Econ 501 Homework Assignment 6 Due Tuesday Feb...

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Econ 501 Homework Assignment 6 Due Tuesday Feb. 26th 1. BB 8.7 A firm’s long-run cost curve is 23 ( ) 40 10 TC Q Q Q Q = −+ . Over what range of output does the production function economics of scale, and over what range does it exhibit diseconomics of scale? 2. BB 8.9 A firm produces a product with labor and capital as inputs. The production function is QL K = . Let w=1 and r=1 be the prices of labor and capital respectively. a) Find the equation for the firm’s long-run total cost curve as a function of quantity Q. b) Solve the firm’s short-run cost minimization problem when capital is fixed at a quantity of 5 units. Derive the equation for the firm’s short-run total cost curve as a function of Q and graph it together with the long-run total cost curve. c) How do the graphs of the long-run and short-run total cost curves change when w=1 and r=4? d) How do the graphs of the long-run and short-run total cost curves change when w=4 and r=1?

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Homework-6 - Econ 501 Homework Assignment 6 Due Tuesday Feb...

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