ps5_f04 - 3 Backpacks are produced with a technology...

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1) Suppose a representative firm in a perfectly competitive, constant cost industry has the following long run total cost function: lrtc(x) = 4x 2 + 100x + 100. a) What is the long run equilibrium price for this industry? b) If market demand is given by the function X D = 1000 – P, where P denotes price, how many firms will operate in this long run equilibrium? 2) Illustrate how all four points on the isoquant/isocost diagram at the right would be represented on a diagram representing total cost functions - both long-run and short-run. Assume L and K are the only two inputs in the production function.
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Unformatted text preview: 3) Backpacks are produced with a technology described by the following production function: b = min{L, 4K}. Assume that the price of labor is $2/unit and the price of kapital is $50/unit. Determine the long run total cost function for producing widgets efficiently. Note: K=kapital, L=labor and these are the only two inputs used in the production of backpacks. Econ 313.1 - Wissink - Fall 2004 PS#5 - XtraQ DUE: Monday Nov 1 at the start of class. L K x x 1 2 A B C D...
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