Practice Problems 8.pdf

# Practice Problems 8.pdf - National University of Singapore...

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National University of Singapore EC2101 Microeconomic Analysis I Department of Economics Semester 1 AY 2016/2017 1 Practice Problems 8 Cost II Presentation schedule: two student presentations; one student presents Question 1 and Question 2, the other student presents Question 3 and Question 4. Question 1 A firm has production function Q = L + K . Let w and r be the prices of labor and capital, respectively. Assume the firm will use both L and K . Derive the demand functions for L and K respectively. Is labor a normal input? Is capital a normal input? Question 2 A firm has production function Q = 50 LK . Let w = 25 and r = 100 be the prices of labor and capital, respectively. a) Find the equations of the firm’s long-run average cost curve. b) Find the equations of the firm’s short-run average total cost curve when capital is fixed at K . For simplicity, assume the fixed cost is sunk. c) In a graph, sketch the long-run average cost curve and the short-run average total cost curves for levels of capital
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• Spring '11
• ZhongSongfa

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