Unformatted text preview: rm has the production function of problem 1, x = 5 KL K + L , and that input prices are given by w = 4 and r = 1 . Also suppose capital is f xed at 4 units, K = 4 . (a) Compute the f rm’s short run average total cost, average variable cost, and marginal cost functions. (b) (This is challenging. Don’t spend too much time on this.) First f nd the value for x that minimizes short run average total cost. Now substitute that value of x into the following functions, and show that they take on the same value: short run average total cost, short run marginal cost, and long run average total cost. 1...
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 Spring '08
 YANG
 Economics, Microeconomics, average total cost, Prof. James Peck, Ohio State University Department of Economics

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