Econ100B PS2 Solutions

Econ100B PS2 Solutions - ECO 100B Problem Set 2 Answers...

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ECO 100B Problem Set 2 Answers will be posted on April 18, 2008 1. Give the formulas for and plot AFC, MC, AVC, and AC if (a) C ( q ) = 10 + 10 q Solution: F = 10 , and so AFC ( q ) = 10 q . MC = d dq C ( q ) = 10 , AV C ( q ) = 10 q q = 10 , and AC ( q ) = 10 q + 10 . (b) C ( q ) = 10 + q 2 Solution : F = 10 , and so AFC ( q ) = 10 q . MC = 2 q , AV C ( q ) = V C ( q ) q = q 2 q = q , and AC ( q ) = 10 q + q . q = f ( L;K ) where K at 10 , w = 5 , and r = 2 . What is the marginal cost if: (a) f ( L;K ) = L 1 2 K 1 2 Solution: q = L 1 2 (10) 1 2 , and hence, L = q 2 10 . Therefore, C ( q ) = rK + wL ( q;K ) = 20 + 5 q 2 10 = 20 + q 2 2 . Therefore, MC ( q ) = q . (b) f ( L;K ) = min f L;K g Solution : For q 10 , L ( q;K ) = q , and so for q < 10 , C ( q ) = rK + wL ( q;K ) = 20+5 q , and so for q < 10 , MC ( q ) = 5 . For
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Econ100B PS2 Solutions - ECO 100B Problem Set 2 Answers...

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