Unformatted text preview: Q D = 3 & P . Find the equilibrium price and quantity sold. Do both &rms produce or does only one of the two &rms produce? (d) Now suppose that there is an increase in demand and after the increases, Q D = 10 & P . Find the new equilibrium price and quantity sold. Do both &rms produce now? 4. Consider a &rm making long-run choices of capital and labor, f ( L;K ) = L 1 5 K 2 5 , and w = 1 , r = 1 . (a) What is the MRTS? Does the production function have diminishing MRTS? (b) Given a &xed level of production & q , what relationship is there between L and K ? (c) To produce & q units of output, how many units of L and K are used? (d) Can you derive the total cost, C ( q ) of producing q units of output? (e) At a price level of p , how much does the &rm produce? (f) At what quantity and price does the &rm make zero pro&ts? Additional questions from book that would be good practice: Q. 32 and 33. 1...
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This note was uploaded on 07/22/2008 for the course ECON 100B taught by Professor Rauch during the Spring '07 term at UCSD.
- Spring '07