hw3_pam2000_spr09 - First and Last Name: Section: Net ID:...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: First and Last Name: Section: Net ID: College of Human Ecology Cornell University, Ithaca, New York Department of Policy Analysis and Management PAM 2000 Intermediate Microeconomics ¨ u A. Sinan Un¨ r – Spring 2009 Homework 3 Due February 25, 2009 Instructions This homework is due by 12:20 pm on February 25th. You may turn in your homework any time before the deadline but no late submissions will be accepted. Write your answers on separate sheets and staple them securely to this cover sheet before you turn them in. Questions Consider a firm which produces burgers using the production function √ Q = F(L, K) = 2 KL. Suppose the wage rate is w = $8/hour and the rental rate on capital rate is r = $2/hour. ¯ 1) Initially, suppose the firm is operating with fixed capital K = 1. (i) Derive the firm’s short run demand for labor. (ii) Derive the firm’s short run total cost function. (iii) Derive the firm’s short run average total cost function. (iv) Derive the firm’s short run average fixed cost function. (v) Derive the firm’s short run average variable cost function. 1 2) Now, suppose that the firm has the option of choosing K as well as L. Given the production function above, the firm will use both inputs at positive levels to produce any given output level. The marginal products of labor and capital are MPL = K and MPK = L so that MRT SL,K = L K K . L What is the cost-minimizing K-L ratio given the input prices? (i) Derive the firm’s demand for a labor as function of its output level. (ii) Derive the firm’s demand for capital as a function of its output level. (iii) What is the firm’s long run total cost function? (iv) What is the firm’s long run average cost? (v) What is the firm’s long run marginal cost? 2 ...
View Full Document

Ask a homework question - tutors are online