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ps4x313_f05 - d Find FLOPPY’s long run total cost curve...

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1. The production function for the personal computers of DISK, Inc., is given by x = 10K 1/2 L 1/2 , where x is the number of computers produced per day, K is hours of machine time, and L is hours of labor input. DISK's competitor, FLOPPY, Inc., is using the production function x = 10K 6/10 L 4/10 . a. If both companies use the same amounts of capital and labor, which will generate more output? That is suppose K DISK =L DISK =K FLOPPY =L FLOPPY . b. Assume that capital is limited to 9 machine hours, but labor is unlimited in supply. In which company is the marginal product of labor greater? Explain. c. Find DISK’s long run total cost curve. Let w=price of labor and r=price of kapital.
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Unformatted text preview: d. Find FLOPPY’s long run total cost curve. Let w=price of labor and r=price of kapital. e. Find DISK’s short run total cost curve assuming that K=9. 2. Given a common wage rate for labor, w, and rental rate for kapital, r, how would the long run total cost function for the production function: x = min{K, L} compare its short run total cost functions? 3. Why are monotonic transformations of utility functions OK but monotonic transformations of production functions are not, in all other way they look and feel the same? Econ 313.1 - Wissink - Fall 2005 PS#4 - XtraQ DUE: Wednesday Oct 19 at the START of class....
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