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Unformatted text preview: wage is 10 dollars per worker. What are the total, fixed, and variable costs for this firm (as a function of quantity produced)? TC= wL+rK = 10L+ 500 but L=[Q^2]/100 => TC= [Q^2]/10 + 500 Fixed Costs = 500 on capital expenditure Variable Costs = (Q^2)/10 e) What is the marginal cost of producing an additional unit of output (hint: take dTC/dQ)? What is the short run supply curve? dTC/dQ = MC = Q/5. To maximize profits, firms set price equal to MC Q/5=P Then the supply curve for a firm is given by Q=5P. f) Suppose the price in the market is 100 dollars. How many units of output should the firm produce in the short run? From above, if P=100, Q=500. g) How much profit will the firm make in the short run? Profit = Total Revenue – Total Cost Profit = P*Q – [(Q^2)/10+500] P=100, Q= 500 and substitute. h) How much profit will the firm make in the long run? Perfectly competitive firms make ZERO profit 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.
- Winter '09