Econ_201A_PS5 - output d Suppose that the rental rate on...

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Econ 102A Problem Set 5 Consider a firm operating in the short run in a perfectly competitive market using a production technology given by F(K,L)=K ½ L ½ . Suppose that the firm is utilizing 100 units of capital input in the short run but the firm can hire and fire workers anytime it wants (ie: capital is a fixed input and labor is a variable input). #1) What type of returns to scale does this technology exhibit? #2) a) What is the short run production function? What type of returns to scale does the short run production function now exhibit? b) If the firm hired 49 workers, how many units of output could it produce? c) How many workers would the firm need to hire in order to produce 100 units of
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Unformatted text preview: output? d) Suppose that the rental rate on capital is 5 dollars per unit of capital equipment and the wage is 10 dollars per worker. What are the total, fixed, and variable costs for this firm (as a function of quantity produced)? e) What is the marginal cost of producing an additional unit of output (hint: take dC/dQ)? What is the short run supply curve? f) Suppose the price in the market is 100 dollars. How many units of output should the firm produce in the short run? g) How much profit will the firm make in the short run? h) How much profit will the firm make in the long run?...
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This note was uploaded on 02/03/2010 for the course ECON econ102a taught by Professor Bandy during the Winter '09 term at UC Riverside.

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